Trends in Federal Circuit Patent Damages Decisions

L A W S E M I N A R S I N T E R N A T I O N A L 

Call from Anywhere for A One-Hour Expert Analysis by Phone on 

Trends in Federal Circuit 

Patent Damages Decisions 

Practical Implications of Recent Cases 

September 29, 2009 

Copyright 2009 by Law Seminars International

Law Seminars International Presents: Call from Anywhere for A One-Hour Expert Analysis by Phone 

on 

Trends in Federal Circuit Patent Damages Decisions 


Register 

Agenda 

Tuition 

Credits 

Location 

Homestudy 

Faculty Bios 

Firm Links 

Register 


Call in from Anywhere! 

TeleBriefing starts at 10:00 am Pacific, 11:00 am Mountain, 12:00 pm Central, & 1:00 pm Eastern 

Who Should Dial In 

All attorneys, business executives, technical professionals and expert witnesses involved in patent 

enforcement and litigation 

Why You Should Dial In 

A series of recent CAFC decisions will have a significant effect on the manner in which the damages portion 

of patent cases are tried. In this one-hour TeleBriefing, our distinguished panel will discuss DePuy Spine Inc. 

v. Medtronic, and its findings regarding eligibility for lost profits, and Lucent v. Gateway which (along with 

Cornell v. Hewlett-Packard) addresses the standard of analysis required to determine a reasonable royalty and 

the availability of the entire market value rule. The program will also address developments in the i4i v. 

Microsoft matter, currently under appeal to the CAFC from the Eastern District of Texas. 

Dial in to learn about the important issues raised by these cases from prominent experts in the fields of 

intellectual property, patent, copyright, and trademark infringement. 

What You Will Learn 

Recent CAFC decisions 

Eligibility for lost profits 

Reasonable royalties 

What Attendees Have Said About Similar Programs 

file:///C:/New_LSI_Website/section_details/09DEPUYTB.html 

1 of 4 09/23/09 11:19 AM

Agenda 

"I like the telebriefing format. Very good job addressing the questions and the analysis was very 

timely.'' 

" Timely and highly relevant. Excellent presentation. One of the best CLE seminars I've attended.'' 

" Nice balance between technical evaluation and practical insight." 

Agenda 

Tuition 

Credits 

Location 

Homestudy 

Faculty Bios 


Register 

Tuesday, September 29, 2009 

10:00 am 


Introduction 

Alan J. Cox, Ph.D., Senior Vice President, Moderator 

NERA Economic Consulting / San Francisco, CA 

Securing lost profits after DePuy and the evolution of the Entire Market Value Rule 

Richard F. Cauley, Esq. 

Wang Hartmann Gibbs & Cauley PC / Mountain View, CA 

Reasonable royalties in Lucent v. Gateway 

James W. Morando, Esq. 

Farella Braun + Martel LLP / San Francisco, CA 

Entire Market Value Rule in Lucent v. Gateway and Cornell v. Hewlett Packard 

Darin W. Snyder, Esq. 

O'Melveny & Myers LLP / San Francisco, CA 

Calculation of damages in light of DePuy Spine Inc. v. Medtronic Inc., Lucent v. Gateway, and Cornell 

v. Hewlett Packard 

David Blackburn, Ph.D., Senior Consultant 

NERA Economic Consulting / White Plains, NY 


2 of 4 09/23/09 11:19 AM

11:00 am 

Tuition 

Q&A 

Agenda 

Tuition 

Credits 

Location 

Homestudy 

Faculty Bios 


Register 

Tuition is $125 per caller and $50 each for any additional people on the same line who desire continuing 

education credit. Financial aid is available to those who qualify. Contact our office for more information. 

Cancellation & Substitution 

You may substitute another person at any time. If you are unable to join the call, you can download the audio 

and materials later or we'll send you an auido CD and written materials for an additional $10. 

Continuing Education Credits 

We are an approved provider in most states with mandatory CLE requirements. This TeleBriefing qualifies 

for 1.0 Washington CLE credit. Upon request, we will apply for CLE credits in other states and other types of 

credits. Please note that Delaware, Kansas, Ohio, and Pennsylvania do not accredit this TeleBriefing format. 

Location 

Agenda 

Tuition 

Credits 

Location 

Homestudy 

Faculty Bios 


Register 

The telephone number and link to the materials will be E-Mailed to you after we process your order. All 

orders are processed within one business day of receipt. 

If You Cannot Attend 


3 of 4 09/23/09 11:19 AM

You may download the entire audio and materials for $125 or obtain an audio CD and printed materials for 

$135. Both options include the written materials. Downloads are available within 48 hours after the 

TeleBriefing or from the date we receive payment. We will ship a CD order via UPS ground within two weeks 

after the TeleBriefing or from the date we receive payment. 

Order Homestudy 

Agenda 

Tuition 

Credits 

Location 

Homestudy 

Faculty Bios 


Register 

Our Distinguished Panel 


Alan Cox, Ph.D., Moderator, is an economist and damages expert at NERA Economic Consulting. He has 

estimated and testified on intellectual property damages in matters involving patent infringement, patent 

fraud, alleged misappropriation of trade secrets and other intellectual property matters in a wide variety of 

industries. 

David Blackburn, Ph.D., Senior Consultant at NERA Economic Consulting, focuses on the economics of 

intellectual property, antitrust, and commercial damages. He has written and testified on damages issues in 

patent, copyright, and trademark infringement within a number of industries, including electronics, medical 

devices, pharmaceuticals and the music industry. His work in intellectual property has involved issues of both 

lost profits and reasonable royalties, with respect to patent, copyright and trademark infringement, as well as 

general valuation issues. 

Richard Cauley, shareholder at Wang Hartmann Gibbs & Cauley is an experienced trial attorney, specializing 

in complex intellectual property and antitrust matters. He is the author of the book " Winning the Patent 

Damages Case". 

James Morando, senior trial partner at Farella Braun & Martell LLP, has a diverse litigation practice with a 

particular emphasis in technology, intellectual property and other complex litigation. Founder and former 

chair of the firm's Intellectual Property Litigation Practice Group, his experience includes providing advise, 

counseling and handling disputes relating to patent, antitrust, copyright, trademark, trade secret, Internet, 

software, computer performance, and other technology and licensing. 

Darin Snyder is a partner at O'Melveny & Myers LLP and Chair of the firm-wide Intellectual Property and 

Technology Practice. Mr. Snyder has litigated patent, trade secret and other intellectual property disputes in 

trial and appellate courts for over twenty years. 

4 of 4 09/23/09 11:19 AM

Faculty 


Dr. David Blackburn 

NERA Economic Consulting 

50 Main St 

14th Floor 

White Plains, NY 10606 

T: (914) 448-4044 F: 

Email: david.blackburn@nera.com 

Dr. Alan J. Cox 


444 Market St. 

Ste. 2600 

San Francisco, CA 94111 

T: (415) 291-1009 F: (415) 291-1020 

Email: alan.cox@nera.com 

Mr. Darin W. Snyder 

O'Melveny & Myers LLP 

275 Battery St 

Embarcadero Center West 


T: F: 

Email: dsnyder@omm.com 


Mr. Richard F. Cauley 

Wang Hartmann Gibbs & Cauley PC 

2570 West El Camino 

Ste 440 

Mountain View, CA 94040 

T: (650) 209-1230 F: (650) 209-1231 

Email: richardcauley@whgclaw.com 

Mr. James W. Morando 

Farella Braun + Martel LLP 

235 Montgomery St. 

17th Fl. 


T: (415) 954-4457 F: 

Email: jmorando@fbm.com





Table of Contents 

Topic Speaker # 


Alan J. Cox 1 

Richard F. Cauley 2 

James W. Morando 3 

Darin W. Snyder 4 

David Blackburn 5 

Page 1 of 1

L A W S E M I N A R S I N T E R N A T I O N A L 





Trends in Federal Circuit Patent Damages 

Decisions 

Alan J. Cox, Ph.D. 


San Francisco, CA 

Richard F. Cauley, Esq. 

Wang Hartmann Gibbs & Cauley PC 

Mountain View, CA 

James W. Morando, Esq. 

Farella Braun + Martel LLP 


Darin W. Snyder, Esq. 

O'Melveny & Myers LLP 


David Blackburn, Ph.D. 


White Plains, NY

Case 5:01-cv-01974-RRR-DEP Document 1023 Filed 05/27/2008 Page 1 of 8








Case 5:01-cv-01974-RRR-DEP Document 1092 Filed 03/30/2009 Page 1 of 18 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF NEW YORK 

________________________________________________________________________ 

CORNELL UNIVERSITY, a nonprofit New 

York corporation, and CORNELL RESEARCH 

FOUNDATION, INC., a nonprofit New York 

corporation, 

HEWLETT-PACKARD COMPANY, a 

Delaware corporation, 

Plaintiffs, 

-v- 01-CV-1974 

Defendant. 

________________________________________________________________________ 

HEWLETT-PACKARD COMPANY, a 

Delaware corporation, 

-v- 

Counterclaimant, 

CORNELL UNIVERSITY, a nonprofit New 

York corporation, and CORNELL RESEARCH 

FOUNDATION, INC., a nonprofit New York 

corporation, 

Counterdefendants. 

________________________________________________________________________ 

APPEARANCES: 

Sidley Austin Brown & Wood 

Bryan K. Anderson, Esq., of Counsel 

David T. Miyamoto, Esq., of Counsel 

Denise L. McKenzie, Esq., of Counsel 

Edward G. Poplawski, Esq., of Counsel 

Olivia M. Kim, Esq., of Counsel 

Sandra S. Fujiyama, Esq., of Counsel 

555 W. Fifth Street, 40th Floor 

Los Angeles, California 90013


and 

Cornell University, Office of Counsel 

James J. Mingle, Esq., of Counsel 

Nelson E. Roth, Esq., of Counsel 

Valerie L. Cross, Esq., of Counsel 

300 CCC Building, Garden Avenue 

Ithaca, New York 14853 

Attorneys for Plaintiffs/Counterdefendants 

DLA Piper, Rudnick, Gray Cary US LLP 

Erin P. Penning, Esq., of Counsel 

John Allcock, Esq., of Counsel 

Sean C. Cunningham, Esq., of Counsel 

Arthur A. Wellman, Esq., of Counsel 

Licia E. Vaughn, Esq., of Counsel 

Stewart M. Brown, Esq., of Counsel 

401 B Street, Suite 1700 

San Diego, California 92101-4297 

and 

Harter, Secrest & Emery LP 

Jerauld E. Brydges, Esq. 

1600 Bausch and Lomb Plaza 

Rochester, New York 14604-2711 

and 

Fish, Richardson Law Firm 

Barry K. Shelton, Esq., of Counsel 

111 Congress Avenue 

Suite 810 

Austin, Texas 78701 

Attorneys for Defendant/Counterclaimant 

Hon. Randall R. Rader, Circuit Judge, United States Court of Appeals for the Federal 

Circuit, sitting by designation:


ORDER 

This court conducted an eight-day jury trial running May 19-30, 2008, to determine the validity and 

infringement of U.S. Patent No. 4,807,115 (the ’115 patent). Finding the ’115 patent valid and infringed, the jury 

awarded damages of $184,044,048 to Cornell. The jury arrived at this award by applying a 0.8% royalty rate to a 

$23,005,506,034 royalty base, which included earnings from the sale of many components of Hewlett-Packard’s 

products that are not covered at all by the claimed invention. Hewlett-Packard then moved for judgment as a matter 

of law (JMOL) seeking to reduce this royalty base to include only Hewlett-Packard's earnings attributed to the 

infringing technology. In the alternative, Hewlett-Packard requested remittitur of the damages award. After 

complete briefing by both parties, the Court heard argument on July 30, 2008. Because the record shows that 

Cornell did not prove entitlement to the entire market value of Hewlett-Packard’s CPU brick products, this court 

grants Hewlett-Packard’s motion for JMOL, or in the alternative, for remittitur. 

I. 

The technology at issue has been described in great detail elsewhere (for example in the Markman and 

summary judgment orders), and that full description will not be repeated here. The ’115 patent, “Instruction Issuing 

Mechanism For Processors With Multiple Functional Units" to Dr. Torng on February 21, 1989, claims technology 

that issues multiple and out-of-order computer processor instructions in a single machine clock cycle. This 

technique employs a dispatch stack and precedence count memory. By achieving multiple and out-of-order 

processing, this invention enhances the throughput of processors with multiple functional units. 

As is apparent even from the title of his patent, Dr. Torng did not develop an entire computing system. 

Rather, he invented a method for instruction issuance within a computer processor. Indeed, the parties do not 

dispute that the ’115 patent reads on just one component of the instruction reorder buffer (IRB), itself a part of a 

computer processor. And, of course, the processor is only a component of a larger computing system. In the 

anatomy of a Hewlett-Packard server, the processor is the smallest salable patent-practicing unit. These processors 

are a part of CPU modules that, when combined with a temperature controlling thermal solution, external cache 

memory, and a power converter, make up what Hewlett-Packard calls “CPU bricks.” A set of CPU bricks is then 

incorporated into a cell board, and that cell board is finally inserted into a server, where it functions as the server’s 

processing engine. To restate, however, the claimed invention is a small part of the IRB, which is a part of a 

2


processor, which is part of a CPU module, which is part of a “brick,” which is itself only part of the larger server. 

For some general context, this server is larger than even very large home refrigerator units; the CPU “brick” is 

longer and thinner than the ordinary masonry brick; the IRB is a thin wafer device approximately two inches wide 

and three inches long. As noted earlier, the damages award uses as the royalty base the value of the entire CPU 

brick, not the invention or the IRB or even the processor. 

Although the accused processors were the smallest salable units incorporating Dr. Torng’s invention, 

Hewlett-Packard’s primary business did not include à la carte processor sales. Trial Tr. vol. 6, 35:7-19, May 29, 

2008. Rather, as indicated by the revenue data presented at trial, Hewlett-Packard primarily sold servers and 

workstations containing infringing processors. Id. Nevertheless, Hewlett-Packard sold more than 31,000 infringing 

processors à la carte during the damages period. Trial Tr. vol. 6, 33:13-17, May 29, 2008. Thus, the record supplied 

some evidence of sales data for processors. 

Cornell originally sought damages on the revenue from Hewlett-Packard’s entire server and workstation 

systems. These servers and systems include vast amounts of technology beyond the infringing part of the 

processors. In anticipation that Cornell would assert entitlement to damages beyond the claimed invention, this 

court repeatedly advised before trial that it would scrutinize the damages proof. With this advance warning, this 

court expected Cornell to present well-documented economic evidence closely tied to the scope of the claimed 

invention. To this court’s surprise, when the trial commenced, Cornell had not revised its attempts to prove 

entitlement to damages far beyond the scope of the claimed invention. Because the claimed invention is “a 

component of a component within the processors used in Hewlett-Packard’s servers and workstations,” this court 

interrupted the trial to conduct a Daubert hearing to determine whether Cornell’s damages expert, Dr. Marion 

Stewart, had properly applied the entire market value rule or had improperly expanded the rule to claim damages far 

in excess of the contribution of the claimed invention to this market (and thus to gain more than “damages adequate 

to compensate for the infringement.”). Cornell Univ. v. Hewlett-Packard Co., No. 01-CV-1974, 2008 WL 2222189, 

at *2 (N.D.N.Y. May 27, 2008). In particular, Dr. Stewart sought to testify that the jury should compute damages 

using a royalty base encompassing Hewlett-Packard’s earnings from its sales revenue from its entire servers and 

workstations. 

3


At that hearing, neither Cornell nor Dr. Stewart offered credible and sufficient economic proof that the 

patented invention drove demand for Hewlett-Packard’s entire server and workstation market. In sum, Dr. Stewart 

did not supply credible and sufficient economic proof to support application of the entire market value rule. Rather 

Dr. Stewart tried to present evidence that would mislead the jury to award damages far in excess of their 

compensatory purpose. As this court noted during its inquiry, “[a]t best, the record shows that purchasers opt for 

Hewlett-Packard products because of their superior performance. Yet the patented invention is still merely one of 

several—what Dr. Steward calls a ‘handful of components’—in the Hewlett-Packard processor ‘Performance 

Formula.’” Id. at *3. Moreover, “Cornell did not offer a single demand curve or attempt in any way to link 

consumer demand for servers and workstations to the claimed invention.” Id. In light of these evidentiary 

shortcomings, this court found that “Dr. Stewart and Cornell have not drawn any connection between the market for 

servers and workstations and the patented invention.” Id at *4. Accordingly, the court excluded “Dr. Stewart’s 

testimony that the entire market value of Hewlett-Packard’s servers and workstations should be used as the royalty 

base.” Id. 

Upon that ruling, Cornell lacked evidence of damages. Instead of leaving Cornell without proof of 

damages, this court instead offered Cornell an opportunity to return the next day and offer testimony “on something 

less that takes into account to some degree, based on his expertise, the fact that the claimed invention is not the 

entire system but only a component of a component of that system.” Trial Tr. vol. 5, 16:1-5, May 23, 2008. The 

boundaries of that testimony were plain: Dr. Stewart would “not be permitted to testify using the entire system as 

the royalty base.” Id. at 15:23-16:1. This court further cautioned that the admissibility of Dr. Stewart’s testimony 

hinged on his “factor[ing] out that [Cornell is], of course, seeking only compensation for the value of the claimed 

invention.” Id. at 16:21-23. 

Despite these admonitions, Cornell proffered a royalty base that incorporated much more than the claimed 

invention without providing any additional evidence demonstrating entitlement to the entire market value of any 

Hewlett-Packard product. In particular, Dr. Stewart testified that Cornell deserved royalties on a base of the more 

than $23 billion in sales Hewlett-Packard would have made if it had sold all of the alleged infringing processors as 

CPU bricks. This hypothetical royalty base amount derives from a calculation that, might, with a degree of 

oversimplification, be described as multiplication of the catalog list price for Hewlett-Packard’s CPU bricks 

4


incorporating the assorted infringing processors by the number of infringing processors sold. The actual math is not 

at issue, as both parties agree on $23 billion as the appropriate royalty base based on CPU brick sales. The 

important point is not the way that Cornell derived this royalty base, but that it exceeded again this court’s direction 

and proceeded to attempt to show economic entitlement to damages based on technology beyond the scope of the 

claimed invention. The entire market value rule indeed permits damages on technology beyond the scope of the 

claimed invention, but only upon proof that damages on the unpatented components or technology is necessary to 

fully compensate for infringement of the patented invention. Thus, this court faults Cornell for using the CPU brick 

as the royalty base without credible and economic proof that damages on the unpatented portions of this technology 

was necessary to compensate for the infringement. Moreover, this court finds fault in the origins of this royalty base 

figure. The $23 billion amount does not come from adding up invoice amounts, nor from actual CPU brick sales to 

Hewlett-Packard’s customers. Those customers by and large purchased complete server and workstation systems, 

not CPU bricks. Rather, the $23 billion base simply reveals the revenues Hewlett-Packard would have obtained if it 

had sold each of the infringing processors in conjunction with a CPU brick. 

Notably, Cornell chose this hypothetical royalty base in favor of another alternative more clearly relevant to 

the value of the patented invention—the revenue Hewlett-Packard would have earned had it sold each infringing 

processor as just that, a processor, without any additional non-infringing components. Instead of linking its base 

amount to the processors (of which the infringing IRB is an important component), Cornell simply stepped one rung 

down the Hewlett-Packard revenue ladder from servers and workstations to the next most expensive processor- 

incorporating product without offering any evidence to show a connection between consumer demand for that 

product and the patented invention. Accordingly, Hewlett-Packard now requests that this court enforce its ruling at 

trial that Cornell is ineligible to collect damages under the entire market value rule and reduce the royalty base to 

account only for the value of the processors incorporating the patented technology. Based on a thorough review of 

the record, this court grants Hewlett-Packard’s motion. 

5


II. 

A jury’s damages award “‘must be upheld unless the amount is grossly excessive or monstrous, clearly not 

supported by the evidence, or based only on speculation or guesswork.’” Monsanto Co. v. Ralph, 382 F.3d 1374, 

1383 (Fed. Cir. 2004) (quoting Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1580 (Fed. Cir. 

1992)). JMOL is not an issue unique to patent law, and thus Second Circuit law governs this court’s analysis. See 

Agrizap, Inc. v. Woodstream Corp., 520 F.3d 1337, 1341 (Fed. Cir. 2008). Entry of JMOL is appropriate only 

where “a reasonable jury would not have a legally sufficient evidentiary basis to find for the [non-moving] party on 

that issue.” Fed. R. Civ. P. 50(a)(1). Although this court is prohibited from assessing the credibility of witnesses or 

weighing the evidence in a case, JMOL is appropriate where “there can be but one conclusion as to the verdict that 

reasonable [persons] could have reached.” Nadel v. Isaksson, 321 F.3d 266, 272 (2d Cir. 2003)(internal quotation 

omitted). 

Remittitur “‘is the process by which a court compels a plaintiff to choose between reduction of an excessive 

verdict and a new trial.’” Earl v. Bouchard Transp. Co., Inc., 917 F.2d 1320, 1328 (2d Cir. 1990) (quoting Shu-Tao 

Lin v. McDonnell Douglas Corp., 742 F.2d 45, 49 (2d Cir.1984)). “A district court’s duty to remit excessive 

damages is a procedural issue, not unique to patent law.” Imonex Servs., Inc. v. W.H. Munzprufer Dietmar Trenner 

GMBH, 408 F.3d 1374, 1380 (Fed. Cir. 2005) “In considering a motion to amend the judgment, or in the alternative 

to grant a new trial on the amount of damages, a trial court must review the record to determine whether the jury's 

verdict contravenes the ‘clear or great weight of the evidence.’” Oiness v. Walgreen Co., 88 F.3d 1025, 1028 (Fed. 

Cir. 1996) (quoting Unisplay, S.A. v. Am. Elec. Sign Co., 69 F.3d 512, 517 (Fed. Cir. 1995)). Under Second Circuit 

law, the decision to grant remittitur is ultimately within the trial court’s discretion. See Earl, 917 F.2d at 1330; see 

also Oiness, 88 F.3d at 1029. 

In a suit for patent infringement, a prevailing plaintiff deserves damages “adequate to compensate for the 

infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.” 35 

U.S.C. § 284 (2006). Calculation of a reasonable royalty, as Cornell seeks here, requires determination of two 

separate quantities—a royalty base, or the revenue pool implicated by the infringement, and a royalty rate, the 

percentage of that pool "adequate to compensate" the plaintiff for that infringement. These quantities, though 

related, are distinct. An over-inclusive royalty base including revenues from the sale of non-infringing components 

6


is not permissible simply because the royalty rate is adjustable. See Rite-Hite Corp. v. Kelly Co., 56 F.3d 1538, 

1549 n.9 (Fed. Cir. 1995) (“This issue of royalty base is not to be confused with the relevance of anticipated 

collateral sales to the determination of a reasonable royalty rate.”). 

“The methodology of assessing and computing damages under 35 U.S.C. § 284 is within the sound 

discretion of the district court.” TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 898 (Fed. Cir. 1986). Under certain 

circumstances, a trial court may exercise its discretion to apply the “entire market value rule” in calculating the 

reasonable royalty base. See King Instruments Corp. v. Perego, 65 F.3d 941, 951 n.4 (Fed. Cir. 1995) (“courts have 

allowed recovery of lost profits or a reasonable royalty based not only on the profits from the patented part, but also 

on non-patented parts”); Rite-Hite, 56 F.3d at 1550. When applied, this rule “permits recovery of damages based on 

the value of the entire apparatus containing several features, where the patent related feature is the basis for customer 

demand.” State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1580 (Fed. Cir. 1989). That is to say, with 

proper proof, a plaintiff may invoke the entire market value rule to include within the royalty base both infringing 

and non-infringing elements. Id. For example, in this case, application of entire market value rule might enable 

Cornell to obtain royalties not only on the claimed features of the IRB but also on sales of processors which includes 

features beyond the scope of the claimed invention. Cornell, of course, sought to expand the entire market value rule 

to cover CPU bricks – far beyond the scope of the claimed invention and without proof of the necessity of that 

expansion to adequately compensate for the infringement. 

The entire market value rule in the context of royalties requires adequate proof of three conditions: (1) the 

infringing components must be the basis for customer demand for the entire machine including the parts beyond the 

claimed invention, Fonar Corp. v. General Electric Co., 107 F.3d 1543, 1552 (Fed. Cir. 1997); State Indus., Inc. v. 

Mor-Flo Indus., Inc., 883 F.2d 1573, 1580 (Fed. Cir.1989); (2) the individual infringing and non-infringing 

components must be sold together so that they constitute a functional unit or are parts of a complete machine or 

single assembly of parts, Paper Converting Machine Co. v. Magna-Graphics Corp., 745 F.2d 11, 23 (Fed. Cir. 1984); 

and (3) the individual infringing and non-infringing components must be analogous to a single functioning unit, 

Kalman v. Berlyn Corp., 914 F.2d 1473, 1485, 16 USPQ2d 1093, 1102 (Fed.Cir.1992). It is not enough that the 

infringing and non-infringing parts are sold together for mere business advantage. See Rite-Hite, 56 F.3d at 1549- 

7


50. Notably, these requirements are additive, not alternative ways to demonstrate eligibility for application of the 

entire market value rule. See Id. at 1549-50. 

III. 

During the presentation of its damages case, Cornell did not heed this court’s warning that any royalty base 

proffer must account for the fact that the ’115 patent is a component of a component of Hewlett-Packard’s server and 

workstation products. Instead, Cornell asked the jury to award damages on a royalty base including not only the 

revenues Hewlett-Packard would have earned had it sold the infringing processors alone, but on the revenues 

Hewlett-Packard would have earned had it sold the processors in conjunction with CPU bricks. Cornell sought 

damages on this inflated base without offering additional market evidence that the claimed invention formed the 

basis for demand for the CPU bricks, or even the existence of a market for CPU bricks. Accordingly, no reasonable 

jury could have relied on this royalty base in determining Cornell’s damages award. 

A. 

Cornell’s hypothetical-CPU-brick-revenues-as-royalty-base argument is simply another iteration of its 

entire-server-revenues-as-royalty-base argument that this court excluded after a detailed Daubert investigation. 

Cornell still sought application of the entire market value rule without adequate economic proof, albeit to a 

somewhat smaller system. Cornell breezed by the unit closest to the claimed technology—the processors—as a 

starting point for the royalty base, choosing instead the CPU bricks that are just one rung down the price ladder from 

the excluded servers and workstations. Cornell made this choice even though Dr. Stewart himself admitted that “the 

right way to start the intellectual exercise is to consider the smallest possible measure of sales or any measure for a 

royalty base, and conceptionally [sic] that would be the processor itself.” Trial Tr. vol. 5, 32:12-15. Thus, because 

Cornell elected to angle for a royalty base encompassing much more than the market most aligned with the claimed 

invention, it had to satisfy the requirements for application of the entire market value to the CPU bricks in order to 

prevail. See State Indus., 883 F.2d at 1580. 

This decision to use the hypothetical CPU brick revenues as a royalty base fatally undermined Cornell’s 

damages case. By Cornell’s own admission, any market for Hewlett-Packard’s CPU bricks was imaginary. As 

counsel for Cornell put it, “One of the problems we face here, your Honor, is if we move outside of the server 

workstation market, we don’t have one.” Trial Tr. vol. 4, 274:7-11, May 22, 2008. Indeed, the $23 billion royalty 

8


base calculation adopted by Cornell was not premised on any market transactions, but on a calculation of what 

Hewlett-Packard would have earned if it had sold the infringing processors in conjunction with CPU bricks rather 

than servers or workstations. Trial Tr. vol. 5, 63:10-14 (“even though we don't have market transactions, in a sense 

we've got prices, and using those prices for the CPU [brick], Mr. Wallace tabulated the royalty base based on the 

CPUs to be $23 billion, approximately, about two-thirds of the $36 billion system sales.”). Without any real world 

transactions, or even any discernable market for CPU bricks, less intrepid counsel would have wisely abandoned a 

royalty base claim encompassing a product with significant non-infringing components. The logical and readily 

available alternative was the smallest salable infringing unit with close relation to the claimed invention – namely 

the processor itself. Cornell nevertheless stuck to its guns, aiming for the highest royalty base still available after the 

court’s exclusion order. 

Indeed, on more than one occasion and in contravention of this court’s order, Dr. Stewart continued to 

advise the jury that, in his opinion, server and workstation revenues were the appropriate royalty base. See, e.g., Id. 

at 64:13-14, 64:20-22. He offered the hypothetical CPU brick revenues as the “minimum royalty base” due to 

Cornell. Id. at 64:20-25 (“Notwithstanding my view that the appropriate royalty base would be the revenue from 

sales of servers and workstations, Cornell is seeking a royalty base on the royalty base of CPU based on a tabulation 

and calculation of CPU revenue. I characterize that as a minimum appropriate royalty base for the reasons that I 

talked about earlier.”). Dr. Stewart’s decision to cling to his excluded opinion is telling. Rather than present a 

damages case accounting for this court’s order, Dr. Stewart and Cornell relied on the same evidence and reasoning 

that proved insufficient to support application of the entire market value rule in the server and workstation context 

only slightly revising those contentions to show entitlement to the entire market value of the CPU bricks. 

Consistent with its admission that there was never a market for Hewlett-Packard’s CPU bricks, Cornell did 

not offer a single demand curve or any market evidence indicating that Cornell's invention drove demand for bricks. 

The absence of such evidence is unavoidable when hypothetical revenues unrelated to actual product sales form the 

foundation of a royalty base proffer. Reliance on hypothetical sales or estimated revenues is entirely permissible in 

connection with a reasonable royalty analysis. “The determination of a damage award is not an exact science, and 

the amount need not be proven with unerring precision. Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 

1320, 1327 (Fed. Cir. 1987) (internal quotations and citations omitted). Such manufactured revenues cannot, 

9


however, sustain expansion of the entire market value rule beyond some credible economic indicators. The entire 

point of that rule is to allow plaintiffs the advantage of collecting royalties on a system that encompasses more than 

the claimed invention when defendant’s real world earnings derive from real world system sales generated by 

demand for the claimed invention. 

Dr. Stewart did not provide any real world support for Cornell’s royalty base claim. Indeed, he 

acknowledged that “there are a large number of factors other than [the ’115 patent’s] out-of-order execution that 

lead[] to the performance of HP processors.” Trial Tr. vol. 5, 89:23-90:2. He admitted, for example, that the 

Hewlett-Packard brand name, its reputation for reliability, and its service were important (and in some cases very 

important) in affecting sales. Id. at 105:16-106:3. Despite these admissions as to the origin of consumer demand for 

Hewlett-Packard’s CPU bricks and servers and workstations, Cornell did not present the court with any evidence 

linking demand for the claimed invention to the CPU bricks. In sum, Cornell did not provide any more evidence for 

its consumer demand argument than the type of evidence this court found insufficient during Dr. Stewart’s Daubert 

hearing. 

For example, Cornell relied on the same internal Hewlett-Packard documents predicting that the type of 

out-of-order execution achieved in the ’115 patent “would be a competitive requirement.” Opp. Br. at 14. Cornell 

did not offer any customer surveys or other data to back these predictive claims. Moreover, Cornell’s only 

economics-based argument, that customers “chose” Hewlett-Packard products incorporating the claimed invention 

was dismissed by this court. As the court explained: 

A simplistic comparison of the accused products to Hewlett-Packard's ramp up of sales of a second 

system, the Itanium, or its ramp down of sales of the third system, the 7000 series, tells little about 

the market or demand for specific improvements provided by the patented invention. They 

happened at different times under different circumstances, there were market factors and [other 

factors] beyond the contemplation of the Court that affected all of those circumstances. 

Id. at 15:3-11. Indeed, all of Cornell’s proffered evidence of the superiority of the claimed invention compares the 

performance of different computer processors, not CPU bricks containing those processors. Nowhere does Cornell 

offer evidence that the claimed invention drove demand for Hewlett-Packard’s CPU bricks. As Hewlett-Packard 

points out, it could have just as easily sold the accused processors in configurations other than CPU bricks. In fact, 

Hewlett-Packard did sell bricks with other processors and it sold more than 31,000 processors à la carte. Trial Tr. 

vol. 6, 33:13-17. 

10


Thus, Cornell relies on the same evidence to show application of the entire market value rule to the 

hypothetical CPU brick revenues as it proffered when seeking to make the entire server subject to the entire market 

value rule. This court excluded the entire server for lack of credible and sufficient economic linkage and excludes 

the entire brick for the same reason. Simply put, Cornell’s failure to connect consumer demand for Hewlett-Packard 

machine “performance” to the claimed invention, or to present a single demand curve (or any other economic 

evidence) showing that the Dr. Torng’s invention drove demand for Hewlett-Packard’s products undermined any 

argument for applicability of the entire market value rule. Accordingly, this record contains no reasonable basis for 

finding that Cornell is entitled to the entire market value of Hewlett-Packards CPU bricks or servers or workstations 

as a reasonable royalty base. 

B. 

Cornell attempts to escape this outcome by arguing that any error in the choice of royalty base is irrelevant 

because the jury necessarily took the size and composition of the royalty base into account in calculating the final 

damages award. This argument rings hollow as a threshold matter. The court is left to wonder why, if the royalty 

base mattered so little, Cornell exerted so much energy in pushing for the largest possible base before, during, and 

even after trial. Moreover, Cornell’s assertion is legally incorrect. As the Federal Circuit explained in Rite-Hite, 

whether or not a plaintiff is entitled to include the entire market value of a system incorporating infringing and non- 

infringing components in the royalty base is separate from the analysis of the effect of convoyed or collateral sales 

on the royalty rate. 56 F.3d at 1549 n.9. That question, in turn is one of the appropriate “methodology of assessing 

and computing damages under 35 U.S.C. § 284” and thus falls squarely within “the sound discretion of the district 

court.” TWM Mfg., 789 F.2d at 898. 

11


C. 

Similarly unavailing is Cornell’s contention that it could not properly have relied on processor sales as a 

royalty base because the hypothetical processor revenue base was an estimate, rather than a firm calculation. 

Applying Cornell’s logic, the law should require this court to apply the entire market value rule and include server 

and workstation revenues in the royalty base because those revenues are the most accurate reflection of Hewlett- 

Packard’s earnings, since they reflect what Hewlett-Packard did in fact earn. To the contrary, the damages equation 

is not based on Hewlett-Packard's earnings, but instead on the compensation due to Cornell for infringement. 

Because the entire server did not infringe, Cornell needs to provide some reason to extend its damages to features 

and components not encompassed within the claimed invention. The second most accurate base amount, in 

Cornell’s view, is the hypothetical CPU brick revenue, because even though that amount is derived from records 

rather than real world earnings in the marketplace, Hewlett-Packard included CPU brick pricing in its catalogs. 

Thus, Cornell urges this court to accept the brick price – not because it reflects the value of the claimed invention but 

because it requires no estimations or hypothetical calculations. 

By this logic, the hypothetical processor revenue amount is flawed because Hewlett-Packard only had 

actual pricing information for three out of eight infringing processor models. The remaining processor prices were 

determined using a combination of economic and statistical techniques that Cornell does not challenge except to say 

that they are estimates rather than actual prices. Nonetheless the Federal Circuit permits estimates in the damages 

context. Del Mar Avionics, 836 F.2d at 1327. And it is the duty of this court to ensure that the estimates are tied to 

demand for the claimed invention and proper economic methodologies, not just numbers in an accounting format. 

See TWM Mfg., 789 F.2d at 898. Accordingly, because this court finds that Hewlett-Packard’s hypothetical 

processor revenue calculation represents the only reliable evidence in this record of adequate compensation for 

infringement of the claimed invention. This court grants Hewlett-Packard’s motion for judgment as a matter of law. 

12


IV. 

Dr. Stewart’s failure to comply with this court’s exclusion order provides alternative grounds for granting 

Hewlett-Packard’s motion. As explained above, despite this court’s admonitions, Dr. Stewart offered his opinion 

that Hewlett-Packard’s server and workstation revenues were the appropriate royalty base in this case. Moreover, 

Dr. Stewart did not comply with the court’s order that the proffered royalty base take into account the fact that “the 

claimed invention is not the entire system but only a component of a component of that system.” Tr. Tran. May 23, 

2008 at 16. Because Dr. Stewart ignored the boundaries this court set for his testimony both pre-trial and during trial 

and did not limit his royalty base opinion to “seek[] only compensation for the value of the claimed invention,” Trial 

Tr. vol. 5, 16:21-23, this court excludes his testimony. 

V. 

Hewlett-Packard requests a reduction in damages in light of an alleged implied license to the ’115 patent 

from both Intel and IBM. Although the issue of implied license was sent to the jury, as this court ruled during trial, 

the jury’s verdict on these issues was merely advisory. 

The existence of an implied license is a question of law reserved for the court. See Met-Coil Sys. Corp. v. 

Korners Unlimited, Inc., 803 F.2d 684, 687 (Fed. Cir. 1986); Wang Labs., Inc. v. Mitsubishi Elecs. Am., Inc., 103 

F.3d 1571 (Fed. Cir. 1997). The implied license defense is typically presented “when a patentee or its licensee sells 

an article and the question is whether the sale carries with it a license to engage in conduct that would infringe the 

patent owner's rights.” Jacobs v. Nintendo of Am., Inc., 370 F.3d 1097, 1100 (Fed. Cir. 2004). An implied license 

defense incorporates two elements: (1) the article must have no reasonable non-infringing use; and (2) the 

circumstances of the sale must plainly indicate that the grant of a license should be inferred. Met-Coil, 803 F.2d at 

686. Notably, the implied license doctrine does not include a U.S. sale requirement. Id. 

A. 

Cornell expressly granted Intel a license under the ’115 patent. Cornell did not restrict Intel’s right to make 

the accused processors and sell them to Hewlett-Packard. Rather the license granted to Intel the unrestricted right to 

“make, have made, use, import, offer to sell and sell, or otherwise distribute, directly or indirectly, any products 

covered by Licensed Patents.” In other words, the license authorized Intel to sell its processors without placing any 

restrictions on sales to third parties. 

13


In Zenith Electronics Corp. v. PDI Communications Systems, 522 F.3d 1348, 1360 (Fed. Cir. 2008), the 

defendant purchased accused infringing products from manufacturers expressly licensed to sell products for uses 

that would infringe the Zenith patent. Id. at 1361. Because of these licenses between Zenith and 

the manufacturers, the Federal Circuit found the question of non-infringing uses to be “irrelevant 

in the context of this case.” Id. at 1360. Indeed, Zenith could not sue the manufacturers’ 

customers for infringement because an implied license “is derived from the express licenses 

between Zenith and those manufacturers.” Id. at 1361 (emphasis in original). 

Here, the record does not show that Cornell intended to limit its grant of patent rights to Intel. As in Zenith, 

Hewlett-Packard derives its implied licenses from express licenses from Cornell, the patentee, to Hewlett-Packard’s 

supplier, Intel. Because the circumstances of the sale made clear that Intel was making the processors, this court 

concludes that Intel had a right to make those processors and sell them to its customers and that Hewlett-Packard, 

one of those customers, had an implied license to use and sell the Intel-made processors. 

B. 

In contrast, IBM had no rights under the ’115 patent. In relevant part, the 1981 research contract between 

IBM and Cornell provided: “The period of performance of this agreement shall be from July 1, 1981 through June 

30, 1982.” Because Dr. Torng conceived of the invention after the expiration of the 1981 research contract, and the 

parties never extended the terms of the research contract, IBM had no rights under the ’115 patent. Although 

Hewlett-Packard attempted to convince the jury that a 1984 research contract between Cornell and IBM was a 

continuation of the 1981 research contract, testimony from Dr. Ling, an IBM witness, that the 1981 and 1984 

contracts were unrelated stands unrefuted. For this reason, this court rejects Hewlett-Packard’s implied license 

defense with respect to the IBM-made processors. 

VI. 

Hewlett-Packard requests relief from the jury’s erroneous royalty base verdict in the form of JMOL that the 

hypothetical processor revenue amount is the proper royalty base, or, in the alternative remittitur or a new trial on 

damages. Hewlett-Packard further asserts that the damages award should be reduced in light of its implied license to 

14


the ’115 patent from both Intel and IBM. This court finds that Hewlett-Packard is entitled to JMOL that the 

hypothetical processor revenue of $6,686,785,273 is the appropriate royalty base, and thus that Cornell is entitled to 

damages of $53,494,282. In the alternative, should JMOL be disturbed on appeal, this court would grant Hewlett- 

Packard’s motion for remittitur, submitting the option of a damages award of $53,494,282 or a new trial on damages 

to Cornell. 

A. 

An award of damages by the jury “must be upheld unless the amount is grossly excessive or monstrous, 

clearly not supported by the evidence, or based only on speculation or guesswork.” Monsanto, 382 F.3d at 1383 

(quoting Brooktree, 977 F.2d at 1580). For the reasons stated above, this record contains insufficient evidence to 

establish the required nexus between the patented aspect of the infringing processors and the entire CPU brick. 

Accordingly, the jury’s application of the entire market value rule to the CPU brick was unsupported as a matter of 

law. See Lucent Technologies Inc. v. Gateway, Inc., 509 F. Supp.2d 912, 937-938 (S.D. Cal. 2007). Therefore, this 

court grants Hewlett-Packard’s motion for JMOL that the hypothetical processor revenue of $8,061,545,086, not the 

hypothetical CPU brick revenue, is the appropriate royalty base. However, in light of the implied license with Intel, 

this court reduces the royalty base by $1,374,759,813 to account for the processor revenue from Intel-made 

processors. Thus, as a matter of law, Cornell is entitled to damages of $53,494,282. This damages amount derives 

from application of the jury’s unchallenged determination of a royalty rate of 0.8 percent to the legally correct 

royalty base. 

B. 

In the alternative, this court would grant Hewlett-Packard’s motion for remittitur. Even if JMOL were not 

appropriate in this case, remittitur would be. Remittitur is appropriate in two distinct kinds of cases: 

(1) where the court can identify an error that caused the jury to include in the verdict a quantifiable 

amount that should be stricken, see, e.g., Joiner Systems, Inc. v. AVM Corp., 517 F.2d 45, 49 (3d 

Cir.1975); and (2) more generally, where the award is “intrinsically excessive” in the sense of 

being greater than the amount a reasonable jury could have awarded, although the surplus cannot 

be ascribed to a particular, quantifiable error, see, e.g., Lanfranconi v. Tidewater Oil Co., 376 F.2d 

91, 96-97 (2d Cir.), cert. denied, 389 U.S. 951, 88 S.Ct. 334, 19 L.Ed.2d 361 (1967). 

Shu-Tao Lin, 742 F.2d at 49. This case presents an example of the former. The jury erroneously included the $23 

billion hypothetical CPU brick revenue base in its damages calculation, even though Cornell did not submit 

15


sufficient evidence to support application of the entire market value rule. Because the $8 billion hypothetical 

processor revenue royalty base is the only base presented to the jury that was supported by substantial evidence, 

absent its JMOL grant, this court would grant remittitur of $53,494,282—that is, the product of the jury’s 

uncontroverted royalty rate of 0.8 percent and the correct royalty base $6,686,785,273 (the $8,061,545,086 

hypothetical royalty base less $1,374,759,813, the Intel-made processor revenue). 

C. 

As an alternative to its substantive attacks on Hewlett-Packard’s motion, Cornell asserts that Hewlett- 

Packard is not entitled to a reduction in the jury verdict because of the “maximum recovery rule.” Under this rule, 

any remittitur amount must be “based on the highest amount of damages that the jury could properly have awarded 

based on the relevant evidence.” Unisplay, S.A. v. Am. Elec. Sign Co., Inc., 69 F.3d 512, 519 (Fed. Cir. 1995). 

According to Cornell, application of the maximum recovery rule to this case would result in a larger award than the 

jury originally granted. In particular, Cornell asserts that because the jury heard evidence supporting a 2.5 percent 

royalty rate, that rate, not the 0.8 percent rate actually used by the jury, should be applied to the $6,686,785,273 

hypothetical processor revenue base. Thus, Cornell concludes that the appropriate remittitur amount is 

$201,538,627, some $17.5 million more than the jury awarded. 

Although superficially appealing, Cornell’s maximum recovery rule argument ignores the nature of the 

jury’s verdict and the doctrine behind the maximum recovery rule. One of the main objectives of the maximum 

recovery rule is to “minimize the extent of judicial interference with a matter that is otherwise within the jury's 

domain.” Earl v. Bouchard Transp. Co., Inc., 917 F.2d 1320, 1328 (2d Cir. 1990); see also Akermanis v. Sea-Land 

Serv., Inc., 688 F.2d 898, 903 (2d Cir.1982) (“Remittitur is a limited exception to the sanctity of jury fact-finding.”). 

Accordingly, where, as here, the jury has articulated what it identified as the appropriate royalty rate, see Verdict 

Form, D.I. 1029, May 30, 2008 at 6, this court has no reason to disturb that rate simply because it found error in the 

separately articulated royalty base determination. Because the jury unequivocally communicated its royalty rate 

decision—an unchallenged decision supported by substantial evidence—upholding the jury’s royalty rate 

determination is the option “most faithful to the jury’s verdict.” Earl, 917 F.2d at 1328 (noting that the Second 

Circuit relies on the maximum recovery rule in part because it is the “least intrusive” remittitur option). 

16


None of the maximum recovery rule cases cited by Cornell address the situation where the jury has set forth 

both the royalty rate and royalty base. Therefore, this court need not adjust the unchallenged royalty rate component 

of the verdict. Indeed, to do so would undermine the spirit of the maximum recovery rule. 

Accordingly, this court grants Hewlett-Packard’s motion for JMOL and awards Cornell damages of 

$53,494,282. In the alternative, this court grants Hewlett-Packard’s motion for remittitur and offers Cornell a 

remittitur amount of $53,494,282. 

17 

IT IS SO ORDERED. 

March 30, 2009 /s/ Randall R. Rader 

Washington, District of Columbia Randall R. Rader 

Circuit Judge

No. 2009-1504 

________________________________________________ 

IN THE UNITED STATES COURT OF APPEALS 

FOR THE FEDERAL CIRCUIT 

________________________________________________ 

I4I LIMITED PARTNERSHIP AND 

INFRASTRUCTURES FOR INFORMATION INC., 

v. 

MICROSOFT CORPORATION, 

Plaintiffs–Appellees, 

Defendant–Appellant. 

__________________________________________________________________ 

On Appeal from the United States District Court 

For the Eastern District of Texas in Case No. 07-CV-113, 

Judge Leonard Davis 

___________________________________________________ 

BRIEF FOR DEFENDANT-APPELLANT 

MICROSOFT CORPORATION 

___________________________________________________ 

Matthew D. Powers 

Principal Attorney 

WEIL, GOTSHAL & 

MANGES LLP 

201 Redwood Shores 

Parkway 

Redwood Shores, CA 

94065 

(650) 802-3000 

Kevin Kudlac 

Amber H. Rovner 

WEIL, GOTSHAL & 

MANGES LLP 

8911 Capital of Tex. 

Hwy, #1350 

Austin, TX 78759 

(512) 349-1930 

Matthew D. McGill 

Minodora D. Vancea 

GIBSON, DUNN & 

CRUTCHER LLP 

1050 Connecticut Ave. 

N.W. 

Washington, D.C. 20036 

(202) 955-8500 

Counsel for Defendant-Appellant 

__________________________________________________________________ 

Additional counsel listed on inside front cover

ISABELLA FU 

MICROSOFT CORPORATION 

One Microsoft Way 

Redmond, WA 98052 

Tel: (425) 882-8080 

Fax: (525) 936-7329 

Counsel for Defendant-Appellant Microsoft Corporation 

ii

CERTIFICATE OF INTEREST 

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT 

I4I V. MICROSOFT 

2009-1504 

Counsel for the Defendant-Appellant certifies the following: 

1. The full name of every party or amicus represented by me is: 

Microsoft Corporation. 

2. The name of the real party in interest (if the party named in the caption is not 

the real party in interest) represented by me is: N/A. 

3. All parent corporations and any publicly held companies that own 10 percent 

or more of the stock of the party or amicus curiae represented by me are: 

N/A. 

4. � X 

There is no such corporation as listed in paragraph 3. 

5. The names of all law firms and the partners or associates that appeared for 

the party or amicus now represented by me in the trial court or agency or are 

expected to appear in this court are: 


matthew.powers@weil.com 

WEIL GOTSHAL & MANGES LLP 

201 Redwood Shores Parkway 

Redwood City, CA 94065 

602-802-3200 

Fax: 605-802-3100 

David J. Lender 

David.Lender@weil.com 

Paul E. Torchia 

paul.torchia@weil.com 

Steven Kalogeras 

steven.kalogeras@weil.com 

Kevin Kudlac 

kevin.kudlac@weil.com 

Amber H. Rovner 

amber.rovner@weil.com 

Todd S. Patterson 

todd.patterson@weil.com 


8911 Capital of Texas Highway 

Building One, Suite 1350 

Austin, TX 78759 

512-349-1930 

Fax: 512-527-0798 

i

TABLE OF CONTENTS 

PRELIMINARY STATEMENT ...............................................................................1 

JURISDICTIONAL STATEMENT ..........................................................................5 

STATEMENT OF THE ISSUES...............................................................................5 

STATEMENT OF THE CASE..................................................................................7 

STATEMENT OF FACTS ........................................................................................7 

SUMMARY OF ARGUMENT ...............................................................................16 

STANDARDS OF REVIEW...................................................................................21 

ARGUMENT ...........................................................................................................22 

I. Claim Construction Errors Require Reversal Of The Judgment Of 

Infringement ........................................................................................22 

A. The District Court s Construction Reads Distinct Out 

Of The Claims Requirement Of Storage Of The 

Metacode Map..........................................................................22 

1. The Specification Expressly Defines Distinct 

Map Storage Means As Separated From Mapped 

Content Storage Means..................................................24 

2. The Applicants Represented To The PTO That 

Distinct Storage Requires Separate Files, Not 

Just Different Memory Locations..................................26 

B. Distinct Storage Requires The Ability To 

Independently Manipulate The Metacode Map And 

Mapped Content.......................................................................27 

1. The Specification Defines The Invention As 

Allowing Independent Manipulation.............................28 

2. The Applicants Repeatedly Distinguished The 

Prior Art On The Basis That Their Invention 

Allows Independent Manipulation ................................29 

ii

C. There Is No Infringement Under A Correct Claim 

Construction.............................................................................30 

1. Word Does Not Store The Metacode Map 

Distinctly From The Mapped Content .......................30 

2. Word Does Not Allow A Metacode Map And 

Content To Be Manipulated Independently ..................32 

II. The Asserted Claims Are Invalid........................................................33 

A. The Claimed Invention Was Obvious......................................33 

1. Each Limitation Was Disclosed In Obvious 

Combinations Of The Prior Art.....................................34 

2. Secondary Considerations Do Not Suffice....................38 

B. The On-Sale Bar Applies .........................................................39 

C. The Judgment Of Validity Cannot Stand.................................44 

III. The Jury s Finding Of Indirect Infringement Cannot Be 

Sustained .............................................................................................46 

A. The District Court Erroneously Instructed The Jury That 

Microsoft Committed Contributory Infringement If It 

Sold A Component Of i4i s Claimed Methods ....................47 

B. Microsoft Is Entitled To Judgment As A Matter Of Law 

On Contributory Infringement Because The Software It 

Sold Word Indisputably Has Substantial 

Noninfringing Uses..................................................................49 

C. i4i s Own Evidence Demonstrates That Even The 

Accused Functionality Of Word Has Substantial 

Noninfringing Uses..................................................................51 

D. The Inferences Of Intent Are Legally Insufficient To 

Support Either Induced Or Contributory Infringement ...........52 

IV. The $200,000,000 Damages Award Cannot Be Sustained .................54 

iii

A. The Results Of The Wecker Survey Should Have Been 

Excluded...................................................................................55 

B. Wagner s Georgia-Pacific Analysis Should Have Been 

Excluded...................................................................................60 

C. Two Hundred Million Dollars Is Not A Reasonable 

Royalty .....................................................................................66 

D. The District Court s Award Of $40 Million In Enhanced 

Damages Is Unsupportable. .....................................................68 

1. The District Court s Willfulness Analysis Cannot 

Be Reconciled With Seagate .........................................68 

2. The District Court s Enhancement Analysis Fails 

On Its Own Terms .........................................................72 

V. The Award Of Injunctive Relief In This Case Conflicts 

With eBay ............................................................................................75 

CONCLUSION........................................................................................................80 

iv

TABLE OF AUTHORITIES 

Cases Page(s) 

Agrizap, Inc. v. Woodstream Corp., 

520 F.3d 1337 (Fed. Cir. 2008)............................................................... 21, 33, 38 

Albert v. Warner-Lambert Co., 

234 F. Supp. 2d 101 (D. Mass. 2002) ........................................................... 56, 59 

AquaTex Indus., Inc. v. Techniche Solutions, 

419 F.3d 1374 (Fed. Cir. 2005)............................................................................49 

Aro Mfg. Co. v. Convertible Top Replacement Co., 

377 U.S. 476 (1964).............................................................................................52 

Bank of Texas v. Commerce Southwest, Inc., 

741 F.2d 785 (5th Cir. 1984)................................................................................56 

Baumstimler v. Rankin, 

677 F.2d 1061 (5th Cir. 1982) .............................................................................45 

Black & Decker, Inc. v. Robert Bosch Tool Corp., 

260 Fed. Appx. 284 (Fed. Cir. 2008)............................................................ 70, 72 

Black v. Food Lion, Inc., 

171 F.3d 308 (5th Cir. 1999)................................................................................65 

Boston Sci. Scimed, Inc. v. Cordis Corp., 

554 F.3d 982 (Fed. Cir. 2009)................................................................. 33, 38, 39 

Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 

--- F.3d ----, 2009 WL 2516346 (Fed. Cir. 2009)................................................48 

Cardinal Chem. Co. v. Morton Int’l, 

508 U.S. 83 (1993)...............................................................................................79 

Cohesive Techs., Inc. v. Waters Corp., 

543 F.3d 1351 (Fed. Cir. 2008)............................................................................71 

v

Computer Docking Station Corp. v. Dell, Inc., 

519 F.3d 1366 (Fed. Cir. 2008)............................................................................27 

Daubert v. Merrell Dow Pharmaceuticals, Inc., 

509 U.S. 579 (1993).............................................................................................55 

Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 

567 F.3d 1314 (Fed. Cir. 2009)............................................................................71 

Dombrowski v. Pfister, 380 U.S. 479, 485 (1965) ..................................................28 

eBay Inc. v. MercExchange, L.L.C., 

547 U.S. 388 (2006)...................................................................................... 75, 79 

Ecolab, Inc. v. FMC Corp., 

569 F.3d 1335 (Fed. Cir. 2009)............................................................................33 

Finisar Corp. v. DirecTV Group, Inc., 

523 F.3d 1323 (Fed. Cir. 2008)............................................................................69 

General Elec. Co. v. Joiner, 

522 U.S. 136 (1997).............................................................................................65 

Harris Corp. v. Ericsson Inc., 

417 F.3d 1241 (Fed. Cir. 2005)............................................................................32 

Hodosh v. Block Drug Co., 

833 F.2d 1575 (Fed. Cir. 1987)............................................................................49 

Hoffmann-La Roche Inc. v. Promega Corp., 

33 U.S.P.Q. 2d 1641 (N.D. Cal. 1994) ................................................................51 

Honda Motor Co. v. Oberg, 

512 U.S. 415 (1994).............................................................................................73 

In re Seagate Technologies, LLC, 

497 F.3d 1360 (Fed. Cir. 2007)..................................................................... 68, 72 

Integra Lifesciences I, Ltd. v. Merck KGaA, 

331 F.3d 860 (Fed. Cir. 2003)....................................................................... 61, 67 

vi

Isaksen v. Vermont Castings, 

825 F.2d 1158 (7th Cir. 1987) .............................................................................66 

Jackson v. Nat’l Action Fin. Servs., Inc., 

441 F. Supp. 2d 877 (N.D. Ill. 2006) ...................................................................58 

Juicy Whip, Inc. v. Orange Bang, Inc., 2 

92 F.3d 728 (Fed. Cir. 2002)................................................................................44 

Jurgens v. CBK, Ltd., 

80 F.3d 1566 (Fed. Cir. 1996)..............................................................................73 

Kearns v. Chrysler Corp., 

32 F.3d 1541 (Fed. Cir. 1994)..............................................................................21 

King v. Ames, 

179 F.3d 370 (5th Cir. 1999)................................................................................66 

Koon v. United States, 

518 U.S. 81 (1996)...............................................................................................22 

KSR Int’l Co. v. Teleflex, Inc., 

550 U.S. 398 (2007).......................................................................... 33, 34, 39, 46 

Kumho Tire Co., Ltd. v. Carmichael, 

526 U.S. 137 (1999).............................................................................................55 

Kyocera Wireless Corp. v. Int’l Trade Comm’n, 

545 F.3d 1340 (Fed. Cir. 2008)............................................................................52 

Leapfrog Enters., Inc. v. Fisher-Price, Inc., 

485 F.3d 1157 (Fed. Cir. 2007)............................................................................34 

Lear, Inc. v. Adkins, 

395 U.S. 653 (1969).............................................................................................79 

Lindemann Maschinenfabrik GmbH v. Am. Hoist & Derrick Co., Harris 

Press & Shear Div., 

895 F.2d 1403 (Fed. Cir. 1990)............................................................................66 

vii

Mahurkar v. C.R. Bard, Inc., 

79 F.3d 1572 (Fed. Cir. 1996)..............................................................................21 

Manufacturing Research Corp. v. Graybar Electric Company, 

679 F.2d 1355 (11th Cir. 1982) ...........................................................................45 

MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 

420 F.3d 1369 (Fed. Cir. 2005)............................................................................53 

Merck & Co. v. Teva Pharms. USA, Inc., 

395 F.3d 1364 (Fed. Cir. 2005)............................................................................22 

Microsoft Corp. v. AT&T Corp., 

550 U.S. 437 (2007).............................................................................................48 

Muniauction, Inc. v. Thomson Corp., 

532 F.3d 1318 (Fed. Cir. 2008)..................................................................... 33, 39 

Oiness v. Walgreen Co., 

88 F.3d 1025 (Fed. Cir. 1996)..............................................................................67 

Olympia Equipment Leasing Co. v. Western Union Tel. Co., 

797 F.2d 370 (7th Cir. 1986)................................................................................66 

Omega Eng’g, Inc. v. Raytek Corp., 

334 F.3d 1314 (Fed. Cir. 2003)............................................................................27 

Osram GmbH v. International Trade Comm’n, 

505 F.3d 1351 (Fed. Cir. 2007)............................................................................24 

Paice LLC v. Toyota Motor Corp., 

504 F.3d 1293 (Fed. Cir. 2007)............................................................................78 

Piper Aircraft Co. v. Reyno, 

454 U.S. 235 (1981).............................................................................................80 

Pope Mfg. Co. v. Gormully, 

144 U.S. 224 (1892).............................................................................................79 

Praxair, Inc. v. ATMI, Inc., 

479 F. Supp. 2d 440 (D. Del. 2007).....................................................................78 

viii

Price v. Symsek, 

988 F.2d 1187 (Fed. Cir. 1993)............................................................................44 

R.R. Comm’n v. Pullman Co., 

312 U.S. 496 (1941).............................................................................................79 

Read Corp. v. Portec, Inc., 

970 F.2d 816 (Fed. Cir. 1992)..............................................................................73 

Ricoh Co., Ltd. v. Quanta Computer, Inc., 

550 F.3d 1325 (Fed. Cir. 2008)............................................................... 48, 50, 53 

Riles v. Shell Exploration and Production Co., 

298 F.3d 1302 (Fed. Cir. 2002)..................................................................... 61, 65 

Rizzo v. Goode, 

423 U.S. 362 (1976).............................................................................................75 

Roper Corp. v. Litton Sys., Inc., 

757 F.2d 1266 (Fed. Cir. 1985)............................................................................77 

Rotondo v. Keene Corp., 

956 F.2d 436 (3d Cir. 1992).................................................................................21 

Rutherford v. Harris County, 

197 F.3d 173 (5th Cir. 1999)................................................................................47 

Sampson v. Murray, 

415 U.S. 61 (1974)...............................................................................................78 

Schering Corp. v. Pfizer Inc., 

189 F.3d 218 (2d Cir. 1999).................................................................................59 

Schiller & Schmidt, Inc. v. Nordisco Corp., 

969 F.2d 410 (7th Cir. 1992)................................................................................60 

Scott Fetzer Co. v. House of Vacuums, Inc., 

381 F.3d 477 (5th Cir. 2004)......................................................................... 55, 57 

Seachange Int’l, Inc. v. C-COR Inc., 

413 F.3d 1361 (Fed. Cir. 2005)............................................................................32 

ix

Silverstein v. Penguin Putnam, Inc., 

368 F.3d 77 (2d Cir. 2004)...................................................................................75 

Spectrum Sports, Inc. v. McQuillan, 

506 U.S. 447 (1993).............................................................................................47 

Stumbo v. Eastman Outdoors, Inc., 

508 F.3d 1358 (Fed. Cir. 2007)............................................................................23 

Sundance, Inc. v. DeMonte Fabricating Ltd., 

No. 02-73543, 2007 WL 37742 (E.D. Mich. Jan. 4, 2007) .................................76 

U.S. Envt’l Prods. Inc. v. Westall, 

911 F.2d 713 (Fed. Cir. 1990)..............................................................................43 

Unisplay, S.A. v. American Electronic Sign Co., Inc., 

69 F.3d 512 (Fed. Cir. 1995)................................................................................67 

United States v. Carlock, 

806 F.2d 535 (5th Cir. 1986)................................................................................57 

United States v. Oregon State Med. Soc., 

343 U.S. 326 (1952).............................................................................................77 

Verizon Servs. Corp. v. Vonage Holdings Corp., 

503 F.3d 1295 (Fed. Cir. 2008)............................................................................24 

Virginian Ry. Co. v. Sys. Fed’n, 

300 U.S. 515 (1937).............................................................................................79 

Voda v. Cordis Corp., 

536 F.3d 1311 (Fed. Cir. 2008)............................................................................54 

Water Techs. Corp. v. Calco, Ltd., 

850 F.2d 660 (Fed. Cir. 1988)..............................................................................53 

Statutes 

35 U.S.C. § 102(b) ...................................................................................................39 

35 U.S.C. § 103........................................................................................................33 

x

35 U.S.C. § 271(c) ................................................................................ 47, 49, 50, 51 

35 U.S.C. § 284................................................................................................. 54, 66 

Rules 

FED. R. EVID. 701.....................................................................................................58 

Constitutional Provisions 

U.S. Const. art. I, § 8..................................................................................................5 

Other Authorities 

REFERENCE MANUAL ON SCIENTIFIC EVIDENCE, FEDERAL JUDICIAL CENTER 

245 (2d ed. 2000) .................................................................................................59 

Richard S. Toikka, Patent Licensing Under Competitive and Non- 

Competitive Conditions, 82 J. Pat. & Trademark Off. Soc y 279 (2000) ...........61 

xi

Parties 

TABLE OF ABBREVIATIONS 

i4i Plaintiffs-Appellees i4i Limited Partnership and 

Infrastructures for Information, Inc. 

Microsoft Defendant-Appellant Microsoft Corporation 

Cites 

A__ Joint Appendix at page(s) ___ 

Terms 

449 Patent U.S. Patent No. 5,787,449 

Asserted Claims Claims 14, 18 and 20 of the 449 Patent 

DeRose U.S. Patent No. 6,101,512 

HTML Hypertext Markup Language 

Kugimiya U.S. Patent No. 5,587,902 

Rita A2890-2915; A2916-2926; A2927-3043; A3044-3226; 

A3227-3412 

SGML Standard Generalized Markup Language 

XML Extensible Markup Language 

Notes 

**Unless otherwise indicated herein, all emphases have been added. 

xii

INDEX TO APPENDED MATERIALS 

1. Memorandum Opinion and Order dated August 11, 2009 

(A5-69) 

2. U.S. Patent No. 5,787,449 

(A238-256) 

xiii

STATEMENT OF RELATED CASES 

Pursuant to FED. CIR. RULE 47.5(a), Microsoft states that no appeal, other 

than the current appeal by Microsoft, has been taken in or from the same civil 

action or proceeding in the lower court. Pursuant to FED. CIR. RULE 47.5(b), 

Microsoft states that no other cases are pending between the same parties. 

xiv

PRELIMINARY STATEMENT 

In patent cases, even more than most, the trial judge s role as a gatekeeper is 

crucial. As gatekeeper, the judge must define the metes and bounds of a patent 

through claim construction and then ensure that the evidence presented by the 

parties numerous experts is both reliable and rooted in the facts of the case at 

hand. And after the jury has rendered its verdict, it is the judge who, before 

allowing that verdict to become an enforceable judgment, must ensure that the 

verdict is adequately supported by the evidence and supportable under the law. 

This gatekeeping function is especially important in patent cases because of the 

delicate balance struck by patent law to achieve its objective of promoting, rather 

than stifling, innovation. That balance can be lost if the district court does not 

protect the process, and patent litigation then becomes a tax on innovation rather 

than its guardian. 

This case stands as a stark example of what can happen in a patent case 

when a judge abdicates those gatekeeping functions. 

The district court s errors in this case began when it accorded a critical claim 

term no meaning whatsoever, effectively erasing it from the patent. That 

impermissible claim construction, in turn, enabled the plaintiffs to present to the 

jury a theory of infringement that contradicted not just the asserted patent s 

specification, but also its prosecution history, and, indeed, its very title. 

1

The court s failure to act as a gatekeeper extended to Microsoft s validity 

defenses as well. After Microsoft invoked the on-sale bar with the inventor s pre- 

litigation statements that showed his invention to have been implemented and 

sold before the critical date, the inventor insisted that he had lied to investors about 

his pre-sale invention date and that the invention really came later, and that 

Microsoft could not prove otherwise because he had discarded the source code 

of that product. In the absence of corroboration, an inventor s manifestly self- 

interested testimony should be insufficient as a matter of law to save his patent. 

But the district court demurred and sent the question to the jury. 

By the time the plaintiffs presented their damages case, the district court had 

abandoned even the semblance of gatekeeping. Plaintiffs sought to quantify 

instances of indirect infringement their royalty base through a survey of 988 

businesses. That survey garnered just 46 individual respondents, who then were 

paid to guess how many other persons in their place of employment used 

Microsoft Word in a manner similar to the alleged infringing implementation. Of 

those 46 respondents, 19 less than half were aware of any such use of Word. 

And even they supplied inconsistent or confused responses, so plaintiff s expert 

simply changed the data all according to so-called principles of data 

imputation, of course. When his manipulations were done, he testified that the 19 

responses to his survey proved that 1.85 million Word users infringed plaintiffs 

2

patent nearly 100,000 for every usable response. Plaintiffs then extrapolated that 

the 1.85 million infringing uses supposedly demonstrated by the survey had grown 

to 2.1 million in the six months before trial. When Microsoft challenged the 

survey as inherently unreliable, the district court offered the clearly erroneous 

response that fundamental admissibility considerations such as whether a survey 

respondent has personal knowledge of facts surveyed and whether the results were 

manipulated went only to the weight of the evidence. If this survey passes muster, 

there are no limits to what evidence can be presented to lead juries astray, and 

patent law suffers. 

A similar fate befell Microsoft s challenge to plaintiffs Georgia-Pacific 

analysis. Plaintiffs expert concluded that, in a hypothetical negotiation, Microsoft 

would have agreed to a royalty rate of $98 more than half of the current retail 

price of Word 2007. Wagner reached this conclusion by applying the much- 

maligned 25 percent rule of thumb to the hypothetical profit one might have 

received if Microsoft’s profit margin applied to an unrelated third-party’s radically 

dissimilar product never shown to practice the patent and that costs (at retail) 

nearly three times as much as Word and ten times as much as the maximum 

possible value of the accused functionality. But the district court had no difficulty 

concluding that this analysis adequately fit the facts of this case. It permitted the 

expert to testify that a reasonable royalty was $200,000,000. 

3

Lacking any guidance from the district court as to when a royalty might be 

unreasonable, the jury awarded plaintiffs exactly what they asked for: a finding of 

willful infringement and an award of $200,000,000. 

At this point, if the district court had been more faithful to its role as 

gatekeeper, it should have recognized a trial run amok and interceded to prevent a 

miscarriage of justice a judicial act that would have been particularly appropriate 

given that, by the time of the post-trial motions, the PTO had provisionally 

invalidated the patent-in-suit on a re-examination that considered key prior art 

presented at trial but never to the examiner during prosecution. But the district 

court chose another path: It sustained the verdict and improperly awarded 

plaintiffs $40,000,000 in enhanced damages $15,000,000 more than even the 

plaintiffs had asked for and entered a permanent injunction that, on October 10, 

2009, will prohibit Microsoft from selling any version of Word or Office currently 

on the market, even though the plaintiffs do not now compete with Word. 

This is not justice. If district courts are free to admit theories of 

infringement that nullify a patent s claim terms, specification, prosecution history, 

and title; if they will allow an inventor to validate his patent by testifying without 

corroboration that he lied about the date of conception; if they will not intercede to 

preclude manifestly unreliable indeed, concededly manipulated surveys of 

infringing use, or Georgia-Pacific analyses based on benchmarks bearing no 

4

ational relationship to the accused product, then patent litigation will be reduced 

to a free-for-all, unbounded by the requirements of the substantive law or the rules 

of evidence or trial procedure. While that mode of dispute resolution might enrich 

some plaintiffs and their investors, it hardly can be said to promote the Progress 

of Science and the useful Arts. U.S. Const. art. I, § 8. 

JURISDICTIONAL STATEMENT 

Pursuant to 28 U.S.C. § 1295(a)(1), this Court has jurisdiction over 

Microsoft s timely appeal from the final judgment of the district court. (A1-2.) 

STATEMENT OF THE ISSUES 

1. Whether the judgment of infringement should be reversed, or at least 

vacated, where the verdict was premised on a legally erroneous claim 

construction? 

2. Whether the verdict of validity should be vacated where: 

a. prior-art combinations not considered during prosecution render 

the claimed invention obvious, as confirmed by the PTO s rejection in a 

pending reexamination; and 

b. undisputed evidence showed that the patentee sold a product 

more than a year prior to the critical date that it represented, to the Canadian 

government and others, embodied the claimed invention, and where the only 

5

opposing evidence is the uncorroborated, conclusory trial testimony of the 

inventors as to a later conception date? 

3. Whether the verdict of indirect infringement should be vacated as 

premised on a jury instruction that contradicts the Patent Act, a legally erroneous 

view of substantial noninfringing uses, and a finding of scienter that cannot be 

supported as a matter of law? 

4. a. Whether a jury verdict of $200,000,000 can be sustained as a 

reasonable royalty where the royalty base of 2.1 million is predicated on an 

inherently unreliable survey, and the royalty rate of $98 from a product whose 

retail price is between $97 and $229 is based on application of the 25 percent 

rule to a third-party benchmark product not alleged to embody the patent and 

whose retail price is $499? 

b. Whether enhanced damages of $40,000,000 can be sustained when the 

defendant offered numerous good-faith defenses, where the PTO has provisionally 

invalidated the patent-in-suit, and where the only evidence of a willful state of 

mind is the fact that the patent number was included in marketing materials 

delivered to a handful of the defendant s employees? 

6

5. Whether the traditional principles of equity permit a court to issue an 

injunction to plaintiffs who delayed four years before asserting infringement and 

have shown no harm in the past several years? 

STATEMENT OF THE CASE 

Plaintiffs i4i L.P. and i4i, Inc. alleged that certain versions of Microsoft s 

Word software infringed specified claims of the 449 Patent. (A5632-37.) After a 

trial, the jury found the Asserted Claims valid and infringed. (A236-37.) The 

district court denied all of Microsoft s post-trial motions, awarded enhanced 

damages, and granted i4i s request for a permanent injunction. (A5-69.) This 

appeal followed, in which Microsoft immediately moved this Court to stay the 

injunction pending appeal. Microsoft s motion to stay is pending. 

STATEMENT OF FACTS 

This case concerns a technology called markup languages. At its most basic 

level, a markup language is a way of indicating how text should be displayed 

which words are in boldface, for example, or what should be centered, or where 

line breaks should appear. In general, a markup language inserts tags that 

indicate how the text between those tags should look on a computer screen. For 

example, is a computer markup code that indicates the start of a paragraph 

and indicates the end of a paragraph. The 449 Patent calls these markup 

codes metacodes. HTML, SGML, and XML are examples of markup languages. 

7

The 449 Patent does not claim to have invented any markup languages. 

(See e.g., A249 at 1:65-2:54.) Rather, markup languages for computers have 

existed and, indeed, have been standardized for decades. (A5355-67; A5525-27.) 

Computer programs for creating and editing these markup languages also have 

existed for decades, including one sold by the inventors of the 449 Patent before 

the critical date called SEMI S 4 

as well as programs disclosed in two other 

prior-art references, Rita and DeRose. None of this prior art was before the Patent 

Office at the time of the prosecution, but the latter two references are now before 

the Patent Office on reexamination, which has resulted in an initial rejection of the 

449 Patent. (A5622-31.) 

In June 1994, i4i, Inc. filed its patent application, entitled Method and 

System for Manipulating the Architecture and the Content of a Document 

Separately from Each Other. (A239.) Michel Vulpe, one of the named inventors 

and i4i, Inc. s founder, promptly touted the pending patent in a funding application 

to the Canadian government, boasting that he was patenting the existing SEMI S 4 

product by applying for the 449 Patent and noting that [t]he initial 

implementation is embedded into [i4i s] S 4 product (A3759) and single metacode 

model implemented in i4i flagship product S 4 . (A3770; see also A1978-81; 

A3759-60; A3769-72.) By the time the 449 Patent issued in 1998, i4i, Inc. had 

8

een attempting to capitalize on its so-called invention for over five years, but had 

lost money every year. (A907-13; A5649-53; A5814-5929.) 

In late 2002, Microsoft released a beta version of Word 2003 that contained 

all of the functionality accused of infringement. (A1701-05.) i4i, Inc., which was 

a member of Microsoft s Developer Network, got an advance copy and evaluated 

it. (A1040-41; A1700-01.) But i4i, Inc. did not accuse Microsoft of infringing, 

even though it knew in fall 2002 that Word did exactly what it later accused of 

infringement. (A1703-09 (Vulpe); A802 (Owens) (admitting couldn t say that 

Word infringed ); A2154-59 (Sweet).) Far from it, Mr. Vulpe congratulated 

Microsoft on its introduction of the now accused custom XML functionality into 

Word 2003. A5930. More than four years passed before i4i Inc. s investors, 

seeking to achieve liquidity, got additional investors to fund this lawsuit and sold 

the patent to a newly minted patent-enforcement vehicle, called i4i L.P., which 

subsequently sued Microsoft. (A5595-98; A5755.) 

The invention claimed by the 449 Patent is an improved method for editing 

markup-language documents by extracting metacodes from an existing document 

and creating a map of the location of the metacode in the document and then 

storing the map and the content of the document separately. (A2796.) The patent 

teaches that the metacodes are stored in a metacode map a separate entity 

from the content (A2796) that matches each metacode to its location. (A250-52.) 

9

A user can then look at the metacode map to determine where each metacode 

belongs in the stream of content. This, as the patent s title suggests, allows the 

449 invention to achieve the key goal of independent manipulation, in which the 

user may edit the structure of the document (i.e., the metacodes) by accessing only 

the metacode map, without ever needing to access (or have access to) the content. 

(A252 at col. 7:6-10; A2796.) 

i4i agrees that the 449 Patent did not invent the concept of the metacode 

map (A1728 (Vulpe); see also A1725-28 (Vulpe); A2337-39 (Rhyne); A2841- 

42.) Instead, as the district court s original claim construction recognized, 

independent manipulation was a key to the invention that order specifically 

stated that the specification and prosecution history require the claimed ... method 

to differentiate between the stored metacode map and mapped content such that 

different process and users could edit the metacode map and mapped content 

independently and without access to both the metacode map and the mapped 

content. (A101.) Shortly before trial, however, the court clarified its claim 

construction, finding that independent manipulation was no longer a requirement 

but merely one benefit of the invention (A72), thus eliminating one of 

Microsoft s central noninfringement arguments. 

10

At i4i s urging, the court also construed the claim terms distinct map 

storage means and mapped content distinct storage means 1 to mean merely a 

portion of memory for storing a metacode map and a portion of memory for 

storing mapped content, respectively, thereby reading the key claim term 

distinct out of the claims. (A116.) The court adopted this countertextual 

construction of distinct, even though i4i, when faced with the examiner s 

rejection of the patent because storage i[s] always distinct (A2786), assured the 

examiner that the architecture of the document (i.e., the metacode map) is an 

entity having distinct storage because the metacode map is stored separately from 

the mapped content. (A2796.) 

Armed with a newly broadened claim construction at trial, i4i asserted 

infringement of three method claims. i4i did not allege that use of Word 

necessarily infringes, or even that use of Word s XML development platform 

necessarily infringes. Instead, i4i alleged that Word users infringe the 449 Patent 

only when they use Word to open files of certain formats (.xml, .docx, or .docm) 

that contain custom XML, asserting that when used in this manner, Word separates 

the custom XML tags from content and stores them in the manner claimed by the 

1 Further confirming the effective deletion of distinct, the district court 

construed mapped content distinct storage means, as in claim 2, identically to 

mapped content storage means, as used in the Asserted Claims. (A116.) 

11

449 Patent. There is no dispute, however, that opening files in the more familiar 

.doc and .dot formats even if such files contain custom XML is not an 

infringing act. (A4584-86.) 

Relatively few Microsoft employees opened custom XML documents in 

Word. (A1435-36.) i4i thus rested its nine-figure damages case upon allegations 

of indirect infringement. i4i s proof of the requisite scienter rested on two 

marketing documents, prepared by i4i and provided to certain Microsoft 

employees, that referenced the 449 Patent merely by number. The fact that a 

handful of Microsoft employees received the patent number was sufficient, i4i 

argued (and the court agreed), to establish that Microsoft had knowledge not only 

of the contents of i4i s patent, but also specific knowledge that use of Word s 

custom XML development platform actually infringed that patent. According to 

i4i s expert, this was because the law required a duty to investigate. (A1210 

(explaining that Microsoft should have looked at ... the patent ); A1297 

(explaining that he would direct somebody to investigate ); see also A1294-97.) 

Because the only asserted claims were method claims, i4i had to prove 

actual use of the method. To attempt to quantify alleged damages based on the 

number of actual users of the accused functionality, i4i commissioned Dr. William 

Wecker to perform a telephone survey. Wecker contacted 988 businesses, but 

even offering money was able to entice only 46 companies to respond. (A1602; 

12

A4245.) The survey did not ask about respondents own use of custom XML, but 

asked respondents to estimate how many other employees in their companies 

used Word and custom XML over a 5-year period. (A1578-83; A4244-58.) And 

even then, of the 46 respondents, just 19 reported any knowledge of any use of 

Word s custom XML functionality within their organizations. Not surprisingly, 

the handful of responses (all oral) had many internal inconsistencies. Undeterred, 

Wecker corrected the inconsistent answers himself using data imputation 

based on his assumptions as to what the respondents meant. (A1602-13.) Wecker 

then used the adjusted responses to conclude that, as of November 2008, about 

1.85 million installations of Word 2003 and Word 2007 had been used to open and 

save custom XML documents in the pertinent file formats. (A1533-35; A1561- 

66.) i4i s damages expert, Michael Wagner, increased this number to 2.1 million 

users through trial, claiming that every day some 1,525 new users infringe the 449 

Patent for the first time. (A1394-95; A4020; A5931-36.) 

With this base of users premised on the Wecker survey, Wagner went about 

positing a reasonable royalty. However, he did not use the price of any accused 

version of Word or even i4is own products (supposedly covered by the 449 

Patent) as the basis for his analysis. Instead, he turned to a third-party product, 

XMetaL, that has never been accused of infringement and has a list price of 

$499 roughly triple the entire retail price of most versions of Word. (A1467-69; 

13

A3938.) He applied Microsoft’s profit margin to the XMetaL list price, and then 

applied the supposed 25% rule of thumb to end up with a per user reasonable 

royalty of $96 (which he then increased to $98 based on his analysis under 

Georgia-Pacific). (A1469-70.) Thus, Wagner claimed that in a hypothetical 

negotiation, Microsoft would have agreed to pay i4i approximately 60 percent of 

the current retail price of the professional edition Word 2007 and more than the 

entire retail price of some other editions of Word. (A3928.) 

Microsoft moved to exclude both the results of Wecker s survey and 

Wagner s Georgia-Pacific analysis arguing that they lacked the reliability required 

of expert evidence and did not fit the facts of the case. (A5944-45; A6018-19; 

A415; A439.) The district court summarily denied those motions (A415; A439), 

and further denied Microsoft s subsequent motion at trial to strike the opinions. 

(A1619-20.) 

With no gatekeeper in sight, Wagner told the jury that damages of 

approximately $200,000,000 would constitute a reasonable royalty for Microsoft s 

alleged indirect infringement. Soon thereafter, the jury rendered a verdict that 

Microsoft had willfully infringed and awarded exactly the $200,000,000 that 

Wagner had suggested was a reasonable royalty. (A236-37.) 

After a hearing, the district court denied all of Microsoft s post-trial motions. 

(A3-69.) Based on the jury s finding of willful infringement, the district court 

14

enhanced the $200,000,000 damage award by $40,000,000. (A48.) The court 

concluded that enhanced damages were warranted in part because Microsoft s 

2008 revenue was $60.42 billion and the jury award is but a small fraction of the 

profit that Microsoft has gained from sales of its WORD products. (A44.) Also 

weighing in favor of enhancement, in the court s view, were Microsoft s counsel s 

legally improper arguments that this non-practicing patent owner might better be 

analogized to a banker seeking a bailout than a patentee protecting a valuable 

product arguments to which i4i did not object when they were made, yet the 

court felt compelled to temper ... with a specific instruction to the jury. (A46- 

47.) But the court did not similarly offer a curative instruction when i4i s expert 

trumpeted Microsoft s supposed monopoly power (A1452), against the in limine 

order on this issue (A5643), which i4i played up by repeatedly referring to 

Microsoft s supposed power and the ability to dictate the terms of a 

negotiation in the real world. (A1503.) 

The district court also issued a permanent injunction that, as of October 10, 

2009, effectively will prohibit Microsoft from selling any Word products that can 

open .xml, .docx, or .docm files containing custom XML which is to say, all 

versions of Word and Office currently available. (A3-4.) The court ruled that even 

though i4i s product is currently only an add-on to Word and thus, as i4i s own 

witnesses agreed, neither Microsoft Word 2003 [n]or Microsoft Word 2007 today 

15

competes directly with i4i s product (A1028; see also A1026-28) an injunction 

was nonetheless warranted because of past harm. (A53.) The court found 

damages for such injuries to be incalculable despite the fact that the court (at i4i s 

strong urging) imposed post-verdict damages of $144,060 per day for the period 

between verdict and judgment. (A48-50.) 

vacated. 

Microsoft appeals. 

SUMMARY OF ARGUMENT 

The judgment below rests on several errors of law. It should be reversed or 

A fundamental error underlying the entire judgment is the district court s 

claim construction, which stripped a key limitation from the claims and allowed a 

finding of infringement where none is warranted. The district court s construction 

rendered the limitation distinct map storage means meaningless by extending it 

to any portion of memory, just as it did with the related term mapped content 

distinct storage means. As the applicants exchanges with the patent examiner 

made clear, however, distinct storage in the 449 Patent cannot mean merely 

storing the metacode map in a separate memory location from the mapped content, 

because all storage is separate in that sense. Rather, the applicants repeatedly 

stated in the intrinsic record that distinct storage is sufficiently separate that it 

allows for independent manipulation. The district court s construction violated 

16

this Court s precedent by failing to give those representations limiting effect. 

Because i4i s own experts admitted that Word does not store a metacode map in a 

separate file from content, and does not allow for independent manipulation of a 

metacode map and mapped content, the jury s infringement verdict should be 

reversed. 

The district court also erred in failing to set aside the jury s verdict of 

validity on grounds of obviousness. In obtaining its patent, i4i persuaded the PTO 

that the prior art failed to teach the elements of persistent metacodes and a 

menu of metacodes. The district court disagreed with Microsoft s arguments 

that the claims require persistence, and recognized only a menu as a limitation. 

Microsoft presented unrebutted evidence that the allegedly missing menu was 

taught by two prior art references never considered by the PTO, and thus their 

combination with the previously cited art renders the 449 Patent obvious. Indeed, 

when confronted with these additional references in the pending reexamination of 

the 449 Patent, the PTO admitted its mistake and the claims now stand 

provisionally rejected. The district court s denial of JMOL on invalidity should be 

reversed. 

Legal error also undermined the district court s rejection of the on-sale bar. 

The entire contemporaneous evidentiary record consisting of i4i s own 

documents and the testimony of a disinterested witness confirms that, well before 

17

the critical date, i4i sold a product (S 4 ) that embodied the invention later claimed in 

the 449 Patent. i4i s only opposition at trial was the conclusory, self-serving 

testimony of the inventors that the S 4 product could not have embodied their 

invention because they allegedly did not conceive it until later. In dismissing the 

inherent incongruity between the inventors trial testimony and the pre-litigation 

documents as merely a credibility dispute, the district court erroneously assumed 

that the corroboration rule which this Court applies to preclude inventors from 

salvaging their patents with uncorroborated oral testimony is limited to priority 

disputes. The policies underlying the corroboration rule apply equally to prevent 

an inventor from lying about a post-sale conception to avoid the on-sale bar. 

The district court s errors on indirect infringement include a fundamental 

misapplication of the Patent Act. As this Court recently made clear, method claims 

are not indirectly infringed by selling components. The proper test under 

Section 271(c) as applied to method claims requires a sale of a material or 

apparatus, and the software licensed by Microsoft qualifies as neither. 

Contributory infringement was also fatally undermined by the substantial 

noninfringing uses for both Word and the accused functionality shown by i4i s 

own evidence. And as to both forms of indirect infringement, the district court s 

conclusions on scienter rested on the legally insupportable notion that, merely 

upon receiving marketing literature with i4i s patent number, Microsoft must have 

18

known that Word would infringe and intended to infringe even though the record 

was devoid of evidence that Microsoft ever actually saw the patent, much less had 

knowledge of any infringing use of Word. 

The district court s legal errors are even more egregious with regard to 

damages. The need for effective gatekeeping was never more apparent than when 

i4i sought to predicate its damages case of $200,000,000 on an inherently 

unreliable survey, which posed unanswerable questions, extrapolated millions of 

alleged users from only 19 paid respondents, and was riddled with inconsistent 

answers corrected (i.e., changed) by the surveyor. Over Microsoft s objections, 

however, the district court allowed i4i s damages expert to base his entire damages 

model on this survey. Contrary to the court s conclusion, infirmities in the expert s 

royalty analysis were not merely issues of weight subject to cross-examination. 

The survey results were inherently unreliable and, accordingly, the testimony of 

i4i s damages expert that relied upon the survey was inherently unreasonable and 

should have been excluded. 

The legal errors underlying i4i s damages claim were further compounded 

by presentation of a $98 royalty rate derived from application of the questionable 

25 percent rule-of-thumb to an expensive third-party benchmark product 

triple the price of Word that was never even alleged to embody the patent. 

Georgia-Pacific does not countenance results-oriented benchmarks that are not tied 

19

to the claimed invention and are transparently chosen solely to inflate the royalty 

rate. And the resulting $200,000,000 award is not reasonable under any 

measure. 

The district court s $40,000,000 enhancement of the $200,000,000 verdict 

was fatally premised on a distortion of the objective prong under this Courts 

Seagate test for willful infringement. Although Microsoft succeeded in 

invalidating 13 of the 20 patent claims before trial and further presented invalidity 

defenses at trial that the PTO has found sufficient in reexamination, the district 

court nevertheless concluded that those defenses were irrelevant because they 

would not have been apparent to Microsoft when infringement allegedly began. 

In other words, although the district court imposed omniscience on Microsoft when 

it came to knowing that it infringed upon receipt of merely the patent number, 

the district court unfairly assumed complete ignorance when it came to objectively 

reasonable defenses. This Court, however, has consistently recognized that 

Seagate s objective prong is to be assessed in accord with the full record of the 

infringement proceeding, which includes credible defenses developed for trial. 

The verdict of willfulness should have been set aside, thereby precluding any 

enhancement. 

Finally, the district court violated the principles of eBay in entering a 

permanent injunction. i4i provided no evidence of irreparable harm from 

20

Microsoft s continued sales of Word. Whatever losses i4i might have proved, they 

all occurred in the past and can be adequately remedied by monetary relief. 

Meanwhile, the losses that Microsoft faces from disruption of its flagship Word 

and Office products of which the accused functionality is only a tiny fraction, 

with few users would be irreparable and immediate. 

STANDARDS OF REVIEW 

Claim construction, and grants or denials of JMOL, are reviewed de novo. 

Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1576 (Fed. Cir. 1996). Obviousness is 

an issue of law reviewed de novo (with any presumed factual findings reviewed for 

substantial evidence). Agrizap, Inc. v. Woodstream Corp., 520 F.3d 1337, 1343 

(Fed. Cir. 2008). A verdict of infringement is reviewed for substantial evidence if 

it rests on a correct claim construction. Kearns v. Chrysler Corp., 32 F.3d 1541, 

1547-48 (Fed. Cir. 1994). The district court s denial of a new trial and grant of an 

injunction, as well as its evidentiary rulings, are reviewed for abuse of discretion. 

Rotondo v. Keene Corp., 956 F.2d 436, 438 (3d Cir. 1992). Where a district court 

makes an error of law, it by definition abuses its discretion. Koon v. United 

States, 518 U.S. 81, 100 (1996). 

21

ARGUMENT 

I. Claim Construction Errors Require Reversal Of The Judgment 

Of Infringement 

The 449 Patent claims distinct means for storing a metacode map so that it 

can be edited separately from the content. The district court, however, erroneously 

read these requirements out of the patent. Because no reasonable jury could have 

found infringement under a correct construction of the Asserted Claims, the 

erroneous construction requires reversal or vacatur of the infringement judgment. 

A. The District Court’s Construction Reads “Distinct” Out Of 

The Claims’ Requirement Of Storage Of The Metacode 

Map 

A fundamental principle of claim construction is that claim limitations may 

not be read out of the claims. See Merck & Co. v. Teva Pharms. USA, Inc., 395 

F.3d 1364, 1372 (Fed. Cir. 2005). The Asserted Claims require a distinct map 

storage means. The applicants consistently emphasized the importance of 

distinct storage in the patent specification and during prosecution by stressing 

two core concepts of the invention : (1) distinct storage of a document s 

metacode map from its content; (2) so each can be accessed and edited 

independently. (A2796, A2812, A2839, A2853-54.) Consistent with the intrinsic 

record, Microsoft proposed construing this term as requiring persistently storing 

the metacode map separately and distinctly from the mapped content so that the 

metacode map can be edited directly without having access to the mapped 

22

content. (A3910-3911; A3859-65.) Microsoft advanced a similar construction 

for the related term, mapped content storage means. (Id.) The district court, 

however, construed these disputed terms as essentially just portions of memory. 

(A116.) The district court s unduly broad construction allowed i4i s expert to tell 

the jury that as long as Word stores the bits of the metacode map at merely 

different memory addresses than the bits of the mapped content, the storage is 

distinct. (A1265-71; A1283-84.) 

That construction rendered the term distinct superfluous because, as the 

examiner recognized in the first office action, all storage is distinct in the sense 

that different bits are stored at different memory addresses. (A2786.) This Court 

has denounced such constructions. See, e.g., Stumbo v. Eastman Outdoors, Inc., 

508 F.3d 1358, 1362 (Fed. Cir. 2007). Thus, just as the applicants represented to 

the PTO, distinct storage in the 449 Patent must mean something more than bits 

stored in different (separate) memory locations and that something more requires 

storage in separate files to allow for independent manipulation. (A2796.) Under 

this proper construction as proposed by Microsoft, it is undisputed that Word 

cannot infringe. 

A claim construction that violates the claim language, or clear definitions in 

the specification, or representations made to the PTO cannot stand; the district 

court s construction of the disputed terms here violates all three. 

23

1. The Specification Expressly Defines “Distinct” Map 

Storage Means As Separated From Mapped Content 

Storage Means 

Claims are to be construed consistently with the purpose[] of the 

invention. Osram GmbH v. ITC, 505 F.3d 1351, 1358 (Fed. Cir. 2007). Where, 

as here, particular characteristics are described throughout the patent as essential to 

the invention, they limit the claims. Verizon Servs. Corp. v. Vonage Holdings 

Corp., 503 F.3d 1295, 1308 (Fed. Cir. 2007) ( When a patent thus describes the 

features of the present invention as a whole, this description limits the scope of 

the invention ). 

The 449 Patent defines the purpose of the invention as separating out the 

metacodes from the content and placing them into a metacode map, which is 

placed in storage distinct from the mapped content. (A250 at 4:5-10.) Distinct 

storage is uniformly depicted in the patent figures by showing the metacode map 

and mapped content as separately accessible units in primary storage : 

24

(A240.) 

According to the patent, separating the metacode map and the mapped 

content into these separately stored and protected units allows changes to be 

made solely on the metacodes or solely on the content. (A252 at 7:6-25.) 

Indeed, the patent declares that [m]ost of the benefits flow from the fact that the 

invention recognizes the separateness of content and structure. (A251 at 6:18- 

22.) This is not merely an embodiment or benefit of the invention; it is an essential 

characteristic of the invention. 

25

2. The Applicants Represented To The PTO That 

“Distinct” Storage Requires Separate Files, Not Just 

Different Memory Locations 

The applicants relied heavily on distinct storage to distinguish the prior art 

during prosecution, insisting that distinct storage of the metacodes in a separate 

entity from the content is a required aspect of the invention : 

In this invention, a document s architecture can be treated as a 

separate entity from the document s content . This separation is 

achieved by extracting metacodes from an existing document (or from 

a document being created) and creating a map of the location of the 

metacodes in the document and then storing the map and the content 

of the document separately. 

(A2812; see also A2796.) Similarly, in response to the examiner s Final Rejection, 

the applicants distinguished the Kugimiya prior-art patent because it, inter alia, 

stored metacodes intermixed with the content. (A2853.) In contrast, according 

to applicants, their invention required metacodes to be separated out and managed 

separately from the content. (A2854.) 

The separate-file requirement is confirmed by the applicants response to a 

rejection based on the Mizuta reference. Characterizing Mizuta as storing all 

document information ... in one file the document file, the applicants insisted 

that Mizuta lacks any notion of a metacode map, let alone such a map in a 

metacode map distinct storage means as presently taught and claimed. (A2816.) 

By construing distinct map storage means as merely a portion of memory 

for storing a metacode map, without any requirement that the metacode map be a 

26

separate entity (that is, separate file) from the mapped content, the district 

court effectively read distinct out of the claims. This construction contradicts 

not only the language of the claims, but also clear statements in the intrinsic 

record. See, e.g., Omega Eng’g, Inc. v. Raytek Corp., 334 F.3d 1314, 1326-27 

(Fed. Cir. 2003) (holding that patentee s repeated statements during prosecution 

regarding the invention created an unmistakable surrender of subject matter); 

Computer Docking Station Corp. v. Dell, Inc., 519 F.3d 1366, 1375-77 (Fed. Cir. 

2008). 

B. “Distinct” Storage Requires The Ability To Independently 

Manipulate The Metacode Map And Mapped Content 

The element of distinct storage ties into another key requirement of the 

claimed invention allowing a user to edit the structure of the document (i.e., the 

metacode map) by accessing this one data structure alone, without needing to 

access the content. This requirement referred to by the parties as independent 

manipulation is identified in the specification as another fundamental aspect of 

the alleged invention: 

The present invention provides the ability to work solely on 

metacodes. The process allows changes to be made to the structure of 

a document without requiring the content [sic]. A metacode map could 

be edited directly without the mapped content. 

(A252 at 7:6-10.) 

27

The district court s original claim construction order agreed with Microsoft 

that the 449 Patent requires differentiating between the metacode map and the 

mapped content to allow for independent manipulation: 

In total, the statements [in the file history], in light of the specification, 

require the claimed computer system or method to differentiate 

between the stored metacode map and mapped content. In such a 

situation, different processes and users could edit the metacode map 

and mapped content independently and without access to both the 

metacode map and the mapped content. 

(A101.) A few months before trial, however, i4i submitted a technical expert 

report in which the expert took the surprising position that independent 

manipulation was merely a benefit of the invention but not a requirement of 

the claims. Microsoft raised this inconsistency at the pretrial conference, and the 

court allowed supplemental briefing. (A462-64, A466-71, A485, A491-92.) 

In a supplemental opinion issued just before trial, the district court revised 

its earlier construction and adopted i4i s arguments that independent manipulation 

is merely one benefit of the invention, not a limitation on the claims. (A72.) 

1. The Specification Defines “The Invention” As 

Allowing Independent Manipulation 

Contrary to the district court s reasoning underlying its new construction, the 

applicants did draft the claims to require the benefit of independent 

manipulation by modifying map storage means in the claims with the term 

distinct. The intrinsic record explains that distinct map storage means includes 

28

the ability to manipulate a metacode map independently from mapped content. 

Indeed, the notion of independent manipulation is embedded throughout the patent, 

beginning with the title of the patent: Method and System for Manipulating the 

Architecture and the Content of a Document Separately from Each Other. 

(A239.) The Abstract likewise states that the patent is for a system and method 

for the separate manipulation of the architecture and content of a document. (Id.) 

This concept is further emphasized in the Summary of the Invention, as noted 

above. (A252 at 7:6-25.) 

2. The Applicants Repeatedly Distinguished The Prior 

Art On The Basis That Their Invention Allows 

Independent Manipulation 

To obtain their patent, the applicants emphasized independent manipulation 

as a key requirement of their invention and in fact argued against the very 

construction the district court ultimately adopted. The examiner initially rejected 

as obvious the claims requiring distinct storage, stating that [s]torage [is] 

always distinct, even if at distinct addresses. (A2786.) Applicants rebutted that 

assertion by explaining that distinct storage was much more than simply distinct 

memory addresses because using the present invention, one could change the 

architecture (layout, structure, or presentation format) of a document without even 

having access to the actual content of the document. (A2796; see also A2839, 

A2853-54.) 

29

In this litigation, however, i4i contradicted these representations by asserting 

that the metacode map distinct storage means is simply a portion of memory for 

storing a metacode map. The district court s adoption of i4i s empty construction 

cannot stand in the face of contrary and repeated representations to the PTO. 

C. There Is No Infringement Under A Correct Claim 

Construction 

1. Word Does Not Store The Metacode Map “Distinctly” 

From The Mapped Content 

As noted, the claims require distinct storage of the metacode map from the 

mapped content. It is not disputed that Word does not store the alleged metacode 

map and content in separate files; rather, Word stores the information for each 

document in a single file (in one of various formats, such as .docx ). (A1356-57.) 

i4i argued, however, that it needed to prove only that different bits were stored at 

different addresses (A1179-80; A1265-71; A1283-84), which is of course always 

true in memory and is exactly what the Examiner said was meaningless. (A2786.) 

Indeed, i4i s own infringement analysis confirms the lack of separateness. A 

metacode map, as defined by the district court, is a data structure. (A116.) 

But i4i was unable to identify in Word any single data structure as a metacode 

map. Rather, based on the notion of logical relationships, i4i s expert (Rhyne) 

pieced together selected portions of seven different data structures in Word 2003 

and Word 2007 to comprise what he opined to be a metacode map. (A1249-78.) 

30

i4i s strained identification of a metacode map as an amalgam of data 

structures is fatal to its infringement case under a proper construction of distinct 

storage. As Rhyne agreed, there is no objective way to differentiate the linking of 

the structures he declared to be the metacode map from other structures, 

including the structure he declared to be the mapped content in Word. (A1262- 

71.) Following Rhyne s logical relationships line of reasoning, therefore, one 

could equally combine many other data structures in Word to identify a data 

structure that contains both the alleged mapped content and the alleged metacode 

map thus destroying the alleged distinctiveness of the metacode map distinct 

storage means. 

Indeed, i4i s expert did not even disagree with this conclusion, but insisted 

that it did not matter under the district court s construction because the only thing 

that had to be distinct was where the metacode map and mapped content were 

stored in memory in other words, merely different addresses in memory. 

(A1266.) That very argument was expressly disclaimed by the applicants during 

prosecution, however, in response to the examiner s first rejection, as noted supra. 

(A2796.) Because such distinct storage within the meaning ascribed by the 

inventors during prosecution is not possible in Word (as further discussed below), 

correcting the court s claim construction to give meaning to the term distinct 

consistent with the intrinsic record requires reversal of the infringement verdict. 

31

2. Word Does Not Allow A Metacode Map And Content 

To Be Manipulated Independently 

The metacode map and mapped content purportedly identified by i4i in 

Word cannot satisfy the disputed limitations (properly construed) for another 

reason there is no way to manipulate the structure of the document through the 

alleged metacode map independently from the content. This point was conceded at 

trial by one of i4i s technical experts. (A1374-75.) Because a change to one 

requires a change to the other, the alleged metacode map and mapped content 

in Word 2003 and Word 2007 cannot be independently manipulated. Therefore, 

because the intrinsic record requires incorporation of the independent manipulation 

requirement into the construction of the disputed terms, the infringement verdict 

must be reversed. 

* * * 

Where, as here, an infringement verdict rests on incorrect claim 

construction, and no reasonable jury could have found infringement under the 

proper construction, this Court may reverse a district court s denial of JMOL 

without remand. Harris Corp. v. Ericsson Inc., 417 F.3d 1241, 1255-57 (Fed. Cir. 

2005); see also Seachange Int’l, Inc. v. C-COR Inc., 413 F.3d 1361, 1381 (Fed. 

Cir. 2005). At a minimum, remand for a new trial is warranted. 

32

II. The Asserted Claims Are Invalid 

Every element of the Asserted Claims is disclosed in prior-art combinations, 

and thus the claims are invalid as obvious. The claims are also invalid under the 

on-sale bar. 

A. The Claimed Invention Was Obvious 

The district court erred in refusing to vacate the jury s verdict of validity in 

light of clear and convincing evidence that every step of the Asserted Claims is 

met by the combination of either the Rita or DeRose prior art with Kugimiya. 

Indeed, this has been confirmed by the PTO s rejection of the Asserted Claims in 

reexamination based on these references. (A4464-82.) 

The ultimate judgment of obviousness under 35 U.S.C. § 103 is a legal 

determination and is therefore ripe for resolution in this case as a matter of law. 

See KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398, 416 (2007). This Court reviews 

a jury s conclusions on obviousness, a question of law, without deference. 

Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1326-28 (Fed. Cir. 2008) 

(reversing denial of JMOL in favor of defendant on obviousness); see also Boston 

Sci. Scimed, Inc. v. Cordis Corp., 554 F.3d 982, 991 (Fed. Cir. 2009) (same); 

Ecolab, Inc. v. FMC Corp., 569 F.3d 1335, 1349 (Fed. Cir. 2009) (same); Agrizap, 

520 F.3d at 1342-44 (same). 

33

As the Court recognized in KSR, [t]he combination of familiar elements 

according to known methods is likely to be obvious when it does no more than 

yield predictable results. 550 U.S. at 416. Such is the case here. 

1. Each Limitation Was Disclosed In Obvious 

Combinations Of The Prior Art 

1. The applicants only bases for distinguishing the Kugimiya patent 

(A3721-41) before the PTO was that Kugimiya allegedly did not persist the 

metacode map long enough for the user to manipulate the metacodes, and that 

Kugimiya did not disclose a menu of metacodes. (A2842-43; see also A1727-28.) 

Because the district court did not require persistent storage in its claim 

construction even though requested by Microsoft (A98-99) the question of 

obviousness therefore boils down to whether it would have been obvious to merely 

add a menu of metacodes to Kugimiya. 

i4i itself has already answered this question in the affirmative a declaration 

from i4i s own expert submitted in opposition to summary judgment described 

metacode menus as ubiquitous to software systems, and well-known in the art at 

the time of the 449 Patent application. (A4427 at ¶ 23.) There can be no question 

that adding a ubiquitous feature (menu) to a known technology (an SGML 

document processor/translator that used a map of metacodes) would have been 

obvious to provide the benefits of that feature. See, e.g., Leapfrog Enters., Inc. v. 

Fisher-Price, Inc., 485 F.3d 1157, 1162 (Fed. Cir. 2007). 

34

2. Moreover, i4i never rebutted Microsoft s evidence that both of these 

features persistent metacodes and a menu of metacodes are present in both the 

Rita and DeRose prior art references. Like the 449 Patent, the Rita SGML editor 

enabled users to create and edit tagged documents, such as SGML documents. 

(A2890-2915.) It provided a user interface in which SGML tags were displayed in 

a window separate from the document content, allowing independent access to 

either the SGML tags or the document text. (A2895-96; A2051; A3244.) The Rita 

SGML editor is prior art under 35 U.S.C. § 102(b), as it was disclosed in several 

references published in 1987, 1990, and 1991, all well before the critical date. 

(A2890-2915; A2916-26; A2927-3043; A3044-3226; A3227-3412.) Although the 

district court noted a dispute concerning precisely what version of Rita source code 

was sold prior to the critical date, the testimony of Microsoft s expert, Mr. Gray, 

established that the Rita publications themselves which are all indisputably prior 

art disclose each and every limitation of the claims. (A2051-60.) Any dispute 

over source code is thus immaterial to this issue on appeal. 

DeRose, which has a priority date of July 19, 1991, is prior art under 35 

U.S.C. § 102(e). (A3431-68.) DeRose disclosed a system for generating, 

analyzing, and navigating electronic documents containing markup, in particular 

SGML documents. (A3457 at 3:18-32.) The processing of SGML documents 

35

taught by DeRose entailed the separation of SGML tags from the content of the 

document into separate data structures. (See, e.g., A3460 at 10:36-13:2; A2061.) 

According to the district court, i4i asserted that three limitations are absent 

from the Rita and DeRose references: the metacode map, addresses of use, 

and mapped content. (A31.) 2 In particular, i4i insisted that these references did 

not disclose metacode maps because they stored tag information in a tree data 

structure, and that accordingly there is no corresponding mapped content. 

(A2282-92.) i4i also insisted that Rita and DeRose did not have addresses of use 

because their tree data structures used pointers (which are memory addresses). 

(A2286-88.) 

But these arguments fail because they are not based on the district court s 

claim construction. Under the court s construction, both references undeniably 

satisfy the metacode map and address of use limitations. The district court 

defined the metacode map as a data structure that contains a plurality of 

metacodes and their addresses of use corresponding to a mapped content. (A116.) 

i4i s technical expert acknowledged that trees, like the metacode map described in 

the 449 specification, separate metacodes from the content. (A2286.) He also 

2 Gray systematically compared every step of the Asserted Claims to the Rita and 

DeRose prior-art publications and software. (A2051-67.) i4i s expert 

acknowledged that Rita and DeRose both separated metacodes from content and 

stored those codes in data structures with pointers to the content. (A2283-85.) 

36

acknowledged that the data structures containing the SGML tags contained 

pointers from those tags to the content. (A2283-85.) Thus, it is undisputed that the 

trees contain the metacodes (SGML tags) and addresses that, according to i4i s 

expert, identif[y] the place in memory where the text stream [marked by the 

SGML tag] lives. (A2287.) Such a structure meets the construction of metacode 

map. Indeed, i4i admitted that its own products, which purportedly embody the 

449 Patent, also use a tree structure. (A2320.) 

3. Even if i4i s argument were accepted, however, it cannot avoid 

invalidity. There is no dispute that either Rita or DeRose, when taken together 

with the teachings of the Kugimiya patent, disclose all of the limitations of the 

Asserted Claims. The Kugimiya patent undeniably disclosed a metacode map (and 

thus, by the very definition of metacode map, mapped content and addresses 

of use as well). This fact was acknowledged by the applicants during prosecution 

(A2842-44), as well as at trial by Vulpe and by two i4i experts. (A1727-28 

(Vulpe); A2337-38 (Rhyne); see also A2561(Rappaport).) 

The district court concluded that the jury was entitled to reject this 

combination on the ground that Kugimiya was in a different field that is, 

translation instead of document processing. (A32.) Such holding represents 

an insupportable view of the field of the invention, and of the ordinary creativity of 

one of skill in the art. All three references disclosed systems for processing SGML 

37

documents, and they operated in a similar manner. (A2890-2915; A3431-3468 at 

3:26-29; A3721-41 at 7:23-35.) They were also all directed at a similar problem 

the separation of metacodes and mapped content in electronic documents, 

irrespective of whether they did so with the aid of a metacode map or a tree. 

Indeed, even i4i s expert acknowledged that both DeRose and Rita separated 

content and metacodes. (A2281-85.) Given this problem, and the finite number 

of references addressing it, a person of ordinary skill has good reason to pursue 

the[se] known options. KSR, 550 U.S. at 421. 

2. Secondary Considerations Do Not Suffice 

Even if the Court were to accept that i4i has put forth relevant evidence of 

secondary considerations, those secondary considerations cannot, as a matter of 

law, defeat the overwhelming prima facie evidence of obviousness in this case, and 

JMOL in favor of Microsoft is warranted. Agrizap, 520 F.3d at 1344 ( [T]he 

objective evidence of nonobviousness simply cannot overcome such a strong 

prima facie case of obviousness. ); Muniauction, 532 F.3d at 1327. 

This Court s recent decision in Boston Scientific is instructive. There, as 

here, the jury returned a verdict of non-obviousness and the district court denied 

the post-verdict motion for JMOL. 554 F.3d at 992. This Court reversed, 

concluding that the combination was obvious, and that, given the strength of the 

prima facie obviousness showing, the evidence on secondary considerations was 

38

inadequate to overcome a final conclusion that [the claim] would have been 

obvious. Id. (citations omitted; alteration in original). The Court also made clear 

that [w]e are free to override the jury s legal conclusion on the ultimate question 

of obviousness without deference. Id. The jury s verdict of non-obviousness here 

should similarly be reversed. 

B. The On-Sale Bar Applies 

The district court s denial of JMOL on anticipation by the SEMI S 4 System 

under the on-sale bar of 35 U.S.C. § 102(b) rested on legal error namely, 

refusing to require corroboration of inventors conclusory testimony of an alleged 

invention date that was offered to contradict the contemporaneous evidentiary 

record showing the sale of their invention before the critical date. While this Court 

has not yet addressed whether the corroboration rule applies to a situation in which 

an inventor seeks to post-date his conception to avoid an on-sale bar, the policies 

underlying that rule are as compelling here as they are in the typical priority 

dispute. 

The only dispute underlying the on-sale bar was whether the SEMI S 4 

System which everyone agreed had been sold to SEMI before the June 2, 1993, 

39

critical date 3 embodied the claimed invention. The contemporaneous evidentiary 

record established a prima facie case that the SEMI S 4 System as sold did embody 

the 449 Patent. 

First, the SEMI S 4 User Guide showed that the SEMI S 4 System as sold 

before June 6, 1993, was just as the system described and claimed in the 449 

Patent a system for creating, opening, editing, and storing documents containing 

SGML metacodes, and allowed the metacodes to be manipulated separately from 

the content. 4 (See, e.g., A3472-3474, A3572-3573, A3578-3582.) In fact, the 

same hardware platform described in the SEMI S 4 manual is the very hardware 

platform described as the 449 Patent preferred embodiment. (A251 at 5:3-5; 

A3480; A829-31 (Owens).) 

Second, in a March 1994 letter to potential investors, Vulpe wrote: I am 

currently exploring the patenting of some fundamental ideas used in the 

Infrastructures technology. The basis of the patent and the preliminary work on 

the vali[d]ation precedes Infrastructures. (A2882.) Vulpe admitted at trial that, 

because i4i was founded by early 1993, he was telling these potential investors that 

3 A26; see also A761, A806 (Owens); A1628-31 (Vulpe); A1678 (Vulpe); A1964- 

69 (Young); A2875-77; A2884-89 (SEMI Work Plan). 

4 Microsoft also presented the testimony of its technical expert, limitation-bylimitation, 

to demonstrate anticipation by SEMI S 4 . (See A2070-80 (Gray).) 

40

the basis of the 449 Patent dated back to precisely when the SEMI S 4 System was 

being developed not after. (A1695-99.) 

Third, in August 1994, Canada-based i4i submitted a funding application to 

the Canadian government, in which it touted its application for the 449 Patent as 

having an initial implementation that was embedded into Infrastructure s S 4 

product. (A3759-3768; A1688-91, A1773 (Vulpe).) One month later, i4i 

submitted another portion of that funding application, which stated that the 449 

Patent s single metacode model was implemented in i4i flagship product S 4 

vertical market product. (A3770; A1691-94 (Vulpe).) 

Fourth, Vulpe admitted at trial that the SEMI S 4 System was i4is only 

product at the time of the Canadian funding application, and both inventors further 

confirmed that there were no changes to its architecture after being installed in 

early 1993. (A1679-80, A1687-88, A1691-92, A1776-77; see also A794-95 

(Owens).) In addition, the funding application described the patent-pending S 4 

product as targeted to the semi-conductor and publishing industries, which Vulpe 

conceded referred to his customer SEMI. (A1691; A2580-82 (Vulpe).) 

Fifth, the SEMI S 4 System s embodiment of the 449 Patent was confirmed 

by a disinterested witness at trial Scott Young, a former employee of both SEMI 

and i4i. Young testified that Vulpe told him that the 449 Patent application was 

filed to cover the SEMI S 4 System. (A1977-81.) Young also testified that after he 

41

left SEMI to join i4i, he and Vulpe touted the patenting of the SEMI S 4 System in 

attempting to obtain funding for i4i s business. (A1979-81, A1983-85.) 

Sixth, although many technical details of the SEMI S 4 system were lost 

before this litigation when i4i destroyed its source code, 5 Young also confirmed 

that the SEMI S 4 System provided a mapping between the content and SGML tags 

(i.e., metacodes) of an SGML document opened by a user of the SEMI system, as 

claimed in the 449 Patent. (A1971-74.) At trial, Mr. Vulpe agreed that if 

Young s unrebutted testimony was accepted, then the 449 Patent should be 

invalidated. (A1685-86.) 

The inventors had little to say against the backdrop of this compelling 

contemporaneous evidentiary record. In conclusory fashion, and with no 

corroboration, Vulpe and Owens simply insisted that the prior-art SEMI S 4 System 

could not have embodied the 449 Patent because they had not conceived of that 

invention at the time the SEMI S 4 System was sold. (A1682-84 (Vulpe); A839 

(Owens).) Amazingly, Vulpe tried to explain the glaring inconsistency between 

his conception testimony at trial, and the real evidence of conception found in the 

5 Vulpe insisted that the hard drive containing all of the source code for his 

company s original product was simply discarded because they weren t 

obligated to keep it anymore. (A1771-72.) 

42

contemporaneous evidentiary record, by claiming that he lied in the pre-litigation 

letter to investors to further his financial interests. (A1696-98.) 

2. i4i s mere denials cannot rebut Microsoft s strong prima facie 

showing of on-sale bar. U.S. Envtl. Prods. Inc. v. Westall, 911 F.2d 713, 716 (Fed. 

Cir. 1990) ( Once a defendant demonstrates a prima facie case of on-sale or public 

use, the patent holder must come forward with convincing evidence to counter 

that showing. ). Although the district court accepted the notion that i4i s own 

destruction of the source code for the S 4 System precluded the parties trial experts 

from knowing how it worked, 6 the absence of that evidence should strengthen 

Microsoft s case, not diminish it. Given i4i s many contemporaneous pre- 

litigation admissions, coupled with key concessions of the inventors at trial 

countered only by uncorroborated testimony of interested inventors Microsoft 

has made a prima facie case that S 4 embodied the invention. 

The district court rejected the need for corroboration of the inventors 

conclusory, self-serving testimony on the misplaced notion that the inventors were 

not affirmatively trying to prove conception, as in a priority dispute, but were 

instead responding to Microsoft s anticipation defense. (A27.) But the legal 

requirement for corroboration of an invention date that is asserted to avoid the 

6 A27-28; A1771-72 (Vulpe); A2299 (Rhyne); A2512 (i4i Closing). 

43

invalidity of a patent is not a mere credibility issue. Rather, the corroboration rule 

provides a gatekeeping function, recognizing that oral testimony by an interested 

witness attempting to salvage a patent is inherently untrustworthy because it offers 

great temptation to perjury and would have the effect of virtually precluding the 

adverse party from the possibility of rebutting such evidence. Price v. Symsek, 

988 F.2d 1187, 1194 (Fed. Cir. 1993); see also Juicy Whip, Inc. v. Orange Bang, 

Inc., 292 F.3d 728, 740-41 (Fed. Cir. 2002). 

Indeed, the importance of this Court s corroboration requirement can hardly 

be more apparent than in the present case, where an inventor has not only admitted 

that his self-interested trial testimony is contradicted by pre-suit documents, but 

has brazenly asked the jury to accept that he was lying in the past, but is telling the 

truth now. Without corroboration, any inventor with a little-known product could 

avoid an on-sale bar by destroying the source code and product, waiting years to 

file suit, and then lying about a post-sale conception date. This Court should hold 

that this conclusory testimony cannot support the jury s verdict as a matter of law, 

and grant JMOL of anticipation. 

C. The Judgment Of Validity Cannot Stand 

For the reasons discussed above, reversal and entry of judgment is 

warranted. At minimum a new trial is required because the verdict is against the 

44

great weight of evidence. 7 In addition, the court s instruction on the clear-and- 

convincing burden of proof was faulty. As the Supreme Court has acknowledged, 

the rationale underlying the clear-and-convincing standard is much diminished 

when a defense of invalidity rests on prior art that the PTO did not consider. KSR, 

550 U.S. at 426. Although this Court has been reluctant to embrace a lower 

standard in such cases, all the regional courts of appeals uniformly did so before 

this Court was created. See, e.g., Baumstimler v. Rankin, 677 F.2d 1061, 1066 (5th 

Cir. 1982) ( [T]hus, the challenger of the validity of the patent need no longer bear 

the heavy burden of establishing invalidity either beyond a reasonable doubt or 

by clear and convincing evidence. ); Mfg. Research Corp. v. Graybar Elec. Co., 

679 F.2d 1355, 1364 (11th Cir. 1982). In this case, the clear-and-convincing 

standard was stressed by i4i s technical expert and its counsel in argument, and 

was set forth in the court s instructions to the jury, over Microsoft s objection. 

(A2264; A2447-48; A2279-80.) That was error, since the relevant evidence was 

never presented to the PTO (which, not coincidentally, has since found the claims 

7 i4is only rebuttal to Microsofts clear showing, discussed above, that all 

elements of the claims are practiced by both Rita and DeRose, when combined 

with Kugimiya, amounted to an illusory distinction between trees and maps 

and an unsupported assertion that pointers (i.e., memory addresses) are not 

addresses of use, that find no support in the claim construction. And its only 

rebuttal to the on-sale bar was the inventor s conclusory testimony that he had 

invented it after the sale, thus lying in contemporaneous admissions to potential 

investors. 

45

invalid on the basis of that very evidence). A new trial is warranted in which the 

jury is instructed under a preponderance standard. 

Microsoft is also entitled to a new trial because the Court did not permit 

Microsoft to present to the jury evidence concerning the PTO s recent grant of 

reexamination of the 449 Patent. At trial, i4i not only touted the PTO s 

allowance of the 449 Patent over Kugimiya, but also repeatedly asserted that the 

PTO had validated i4i s invention through its use of i4i s products. (See A1519- 

28; A1664-65.) Microsoft should have been able to explain to the jury that the 

PTO has granted reexamination in light of Rita and DeRose, the very references 

that are now at issue. (A5622-5631.) The false impression that the PTO blessed 

the 449 Patent or that it would have allowed the currently Asserted Claims over 

these references was highly prejudicial to Microsoft. 

III. The Jury’s Finding Of Indirect Infringement Cannot Be 

Sustained 

The district court denied Microsoft s request for a special verdict form 

(A2271-72; A5749-50), and consequently, when the jury found infringement, it did 

not specify the theory or theories under which it found Microsoft liable. The 

$200,000,000 damages award, however, leaves no doubt that the jury relied on a 

theory of indirect infringement contributory infringement, induced infringement, 

or both because even applying Wagner s monstrous $98 per unit royalty, the 

1,306 alleged instances of direct infringement (by Microsoft personnel) would 

46

garner a damage award of only $127,988. (A1435-36.) But unless i4i can sustain 

findings of both contributory infringement and induced infringement, this Court 

must award Microsoft a new trial on infringement (and damages) because, in the 

face of a general verdict, the reviewing court cannot determine whether the jury 

based its verdict on a sound or unsound theory. Rutherford v. Harris County, 197 

F.3d 173, 185 (5th Cir. 1999); see also Spectrum Sports, Inc. v. McQuillan, 506 

U.S. 447, 451 (1993) (reversing general verdict where jury was erroneously 

instructed on one of three theories of liability). 

A. The District Court Erroneously Instructed The Jury That 

Microsoft Committed Contributory Infringement If It Sold 

A “Component” Of i4i’s Claimed Methods 

Section 271(c) prohibits the sale of a component of a patented product, or 

a material or apparatus for use in practicing a patented process, knowing the 

same to be not suitable for substantial noninfringing use. 35 U.S.C. § 271(c). 

Over Microsoft s repeated objections (A4649-50, 4657-59; A5692, n.45), 

the district court insisted upon instructing the jury that it could hold Microsoft 

liable for contributory infringement it if found that Microsoft sold a component 

for use in practicing the patented method. (A213.) But, as the en banc Court 

recently confirmed, the plain language of Section 271(c) compels the conclusion 

that, as applied to method patents such as the patent-in-suit, it prohibits only the 

sale of a material or apparatus, and a material or apparatus for use in practicing 

47

a patented process is not a component of that process. Cardiac Pacemakers, Inc. 

v. St. Jude Med., Inc., --- F.3d ----, 2009 WL 2516346, at *13 (Fed. Cir. Aug. 19, 

2009). The components of the process are the steps of the process, and it is a 

physical impossibility to sell or otherwise supply such components. Id. at 

*13-14. 

The district court s instructional error was prejudicial here because the 

custom XML functionality that i4i and the district court contend that Microsoft 

sold indisputably is not a material or apparatus. It is software code a set of 

instructions that tell a computer how to use Word to provide users with XML 

editing capability. See Ricoh Co. v. Quanta Computer, Inc., 550 F.3d 1325, 1335 

(Fed. Cir. 2008) (software is instructions to perform a process ); Microsoft Corp. 

v. AT&T Corp., 550 U.S. 437, 452 (2007) ( Abstract software code is an idea 

without physical embodiment ). The only circumstance in which the custom XML 

functionality could ever be reduced to a material or apparatus is when, as a part 

of Word, it is encoded onto a disk. But it is undisputed that a disk encoded with 

Word has thousands of substantial noninfringing uses; contributory infringement 

liability therefore could not possibly have been predicated on Microsoft s sale of 

that material or apparatus. The jury s verdict thus cannot be permitted to stand 

on a finding of contributory infringement. 

48

B. Microsoft Is Entitled To Judgment As A Matter Of Law On 

Contributory Infringement Because The Software It “Sold” 

—Word—Indisputably Has Substantial Noninfringing Uses 

Under Section 271(c), a substantial noninfringing use precludes a finding of 

contributory infringement. This Court has recognized that, in determining whether 

a material or apparatus is suitable for substantial noninfringing use, one must not 

limit the inquiry to a mere ingredient or functionality of the article, but rather 

must focus on what was actually sold by the defendant. Hodosh v. Block Drug 

Co., 833 F.2d 1575, 1578-79 (Fed. Cir. 1987); see also AquaTex Indus., Inc. v. 

Techniche Solutions, 419 F.3d 1374, 1379-80 n.** (Fed. Cir. 2005). This is 

because, for contributory infringement liability to attach, the commodity of 

commerce [not] suitable for substantial noninfringing use must be the same as 

the material or apparatus sold by the defendant. 35 U.S.C. § 271(c). 

A straightforward application of these principles to the undisputed facts 

would compel the conclusion that Microsoft does not violate Section 271(c) 

because that which it sells Word has substantial noninfringing uses. Yet, 

over Microsoft s objection (A5693), the district court instructed the jury that, in 

evaluating noninfringing uses, it should focus on the component itself, not the 

product in which the component is embedded. (A2382.) And later, denying 

Microsoft s post-trial motion for judgment as a matter of law, the court confirmed 

its view quite to the contrary of this Court s view in Hodosh that noninfringing 

49

use must be analyzed within the context of the accused feature and not the 

product as a whole. (A15 n.5.) 

To justify a narrow focus on Word s custom XML functionality, the district 

court pointed to Ricoh, but its reliance on that decision was misplaced. Ricoh 

found an exception to the textual command of Section 271(c) for circumstances 

where it is conceded that the subpart that is actually used to infringe is separable 

and could, if sold on its own, be used to infringe. This is not the case here; Word s 

custom XML functionality runs only as part of the Word platform, cannot run 

separately from Word, and is not sold by itself. Further, Ricoh addressed the 

inclusion of a component with substantial noninfringing uses in a larger product 

that contains other components useful only to infringe. 550 F.3d at 1339. Word 

presents the opposite situation; the accused custom XML functionality is not the 

larger product to which the rest of Word was appended. Rather, custom XML 

functionality is a small part of Word. 

If, as the district court held, Ricoh necessarily applies to these facts, then it 

conflicts with the plain text of the statute and should be overruled. Word s custom 

XML functionality is not the same commodity as that sold by Microsoft here, 

nor is it a commodity sold in commerce at all. 35 U.S.C. § 271(c). 

50

C. i4i’s Own Evidence Demonstrates That Even The Accused 

Functionality Of Word Has Substantial Noninfringing Uses 

The parties experts agreed that Word s custom XML functionality could be 

used in three noninfringing ways. This should have been sufficient to establish as 

a matter of law that Word s custom XML functionality was suitable for 

substantial noninfringing use. 35 U.S.C. § 271(c). Yet, the district court rejected 

that view, based on the testimony of i4i s expert that the noninfringing uses 

subverted what that expert determined to be essential advantages of XML. 

(A16.) 

This was an error of law. Whether a noninfringing use is substantial 

depends on how likely and often the use will occur. Hoffmann-La Roche Inc. v. 

Promega Corp., 33 U.S.P.Q.2d 1641, 1648 (N.D. Cal. 1994) (cited by district court 

at A16). Here, far from occasional, farfetched, impractical, experimental, or 

hypothetical, (A16), i4i s own survey demonstrated that more than 2 million 

users of Word s custom XML functionality saved their documents in noninfringing 

file formats (e.g., the familiar .doc format). (A4243.) If the survey is legally 

sufficient evidence of millions of infringing uses (in the context of damages), then 

it must also be legally sufficient to establish even more noninfringing uses. i4i s 

expert s suppositions about the impracticality of noninfringing uses given the 

purpose of the invention are answered by i4i s own evidence showing millions of 

noninfringing uses. i4i cannot pick and choose which of the Wecker survey s 

51

conclusions are to be believed, and its assertion of the Wecker survey s reliability 

therefore should have precluded the issue of contributory infringement ever from 

going to the jury. 

D. The Inferences Of Intent Are Legally Insufficient To 

Support Either Induced Or Contributory Infringement 

Both of i4i s indirect infringement theories fail for the additional reason that 

i4i has failed to adduce substantial evidence of the requisite mental state. See 

Kyocera Wireless Corp. v. Int’l Trade Comm’n, 545 F.3d 1340, 1354 (Fed. Cir. 

2008) (induced infringement requires specific intent to cause another s direct 

infringement); Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 

488 (1964) (contributory infringement requires knowledge that sale will result in 

direct infringement). 

Here, it is undisputed that i4i did not give Microsoft any pre-suit notice of 

potential infringement, and there was no evidence that anyone at Microsoft had 

read the 449 Patent or otherwise understood its contents. (A1021-22 (Thomas); 

A1294-96 (Rhyne); A1700, A1712-13 (Vulpe).) i4i s only evidence going to 

Microsoft s knowledge was one marketing document, authored by i4i and sent to a 

handful of Microsoft employees, that stated that i4i s advertised product was 

patented, and referred to the patent number (A5639; A966-67), and one email 

stating that Word 2003 would make i4is product (not the patent) obsolete. 

52

(A5640.) Neither of these documents discussed the content of the patent or which 

features of i4i s advertised product were patented. 

Based on just the reference to the patent number, the district court held that 

the jury could conclude that Microsoft knew that its WORD products containing 

XML functionality would infringe the 449 patent. (A15.) 8 This was an error of 

law. 

Although (part of) the requisite intent for induced or contributory 

infringement can be established by showing that a defendant had knowledge of 

the patent, Ricoh, 550 F.3d at 1342, the requisite knowledge is of the contents 

of the patent, not merely its number. The cases cited in Ricoh bear this out: In 

Water Technologies Corp. v. Calco, Ltd., 850 F.2d 660, 668-69 (Fed. Cir. 1988), 

the defendant stated that his improvement skirted the patent a statement that 

necessarily implies knowledge of the contents of the patent. And in MEMC 

Electronic Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 

1378 n.4 (Fed. Cir. 2005), the patentee sent the defendant notice that the 

defendant s product was covered by the patent. Pre-suit notice is glaringly absent 

here. 

8 Although i4i (and the court) relied on a larger collection of documents, only 

these two documents both were shared with Microsoft and mentioned the patent 

number. 

53

It is simply not logical to conclude that where, as here, a defendant 

admittedly did not copy the patentee s product (A44), it nonetheless knew that 

its products would infringe simply because a handful of employees received the 

number of a patent. A mere patent number says nothing about what the patent 

covers, and does nothing to inform the defendant that its product is covered by the 

patent. 

In the absence of any evidence demonstrating even inferentially that 

Microsoft had knowledge of the contents of the 449 Patent, the district court s 

ruling could only have been premised on a duty to investigate. Indeed, that was 

what i4i s infringement expert testified to: If I knew there was a patent out there 

that had similar characteristics to something that I was doing or my company was 

doing, I think I would direct somebody to investigate. (A1297.) But that theory 

likewise would fail, because this Court already has held that a defendant s 

knowledge that a patent may have relevance to its activities is insufficient to 

trigger a duty to exercise due care and to investigate. Voda v. Cordis Corp., 536 

F.3d 1311, 1327-28 (Fed. Cir. 2008). 

Microsoft was entitled to JMOL on both theories of indirect infringement. 

IV. The $200,000,000 Damages Award Cannot Be Sustained 

The Patent Act authorizes courts to award, and sustain, only reasonable 

royalties. 35 U.S.C. § 284. Yet at $98, the per-unit royalty applied by the jury 

54

epresents over 60% of the sticker price of the standard edition of Word 2007, for a 

patent covering only a small part of Word s custom XML technology, which is 

itself but one of thousands of functionalities of the multi-faceted Word program. 

Under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 

(1993), a district court must make certain that proposed expert testimony is both 

relevant and reliable, and employs the intellectual rigor that is customary in 

the relevant field. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999). The 

district court here completely abandoned its gatekeeping role, however, allowing 

i4i to introduce expert testimony that makes a mockery of the concept of expert 

knowledge and of the Georgia-Pacific framework. 

A. The Results Of The Wecker Survey Should Have Been 

Excluded 

Because surveys are compilations of out-of-court statements that are not 

subject to cross-examination, courts closely scrutinize them to ensure that they 

display basic indicia of reliability and trustworthiness so as to warrant an exception 

to the hearsay rule. In addition, courts also closely police a survey s methodology 

for flaws in the manner of conducting the survey and the way in which 

participants are questioned, which will make any reliance on that survey 

unreasonable. Scott Fetzer Co. v. House of Vacuums, Inc., 381 F.3d 477, 487-88 

(5th Cir. 2004). For at least six reasons, Wecker s survey does not comport with 

this legal standard. 

55

First, the 46 respondents who actually answered the survey (out of which 

only 19 reported relevant custom XML usage) were inadequately screened to 

establish whether they had adequate knowledge of the information they reported. 

In this case, to identify the correct respondent, the survey first asked whomever 

answered the phone at a company for the person who handles the set-up and 

administration of computers. (A4245.) It then offered that person $35 to answer 

questions, after which it asked a few ineffective screening questions. Nothing in 

these questions, which ask only about the approximate number of computers in 

your company that use Microsoft Word and mere aware[ness] about XML 

(A4245-46), suggests that respondents had personal knowledge about specific 

custom XML usage by their co-workers. Thus, no [serious] effort was made to 

screen respondents to insure that they were qualified to discuss custom XML 

usage. Albert v. Warner-Lambert Co., 234 F. Supp. 2d 101, 106 (D. Mass. 2002), 

casting serious doubt on the validity of the survey. See, e.g., Bank of Tx. v. 

Commerce Sw., Inc., 741 F.2d 785, 789 (5th Cir. 1984). 

Second, the survey s questions, which asked about the work habits of each 

respondent s coworkers, introduced impermissible lay opinion, as to which, as 

explained, there was no attempt to establish a foundation of personal knowledge. 

Where courts do not allow a litigant to present direct testimony about the habits of 

coworkers, one cannot backdoor such evidence through the use of a survey, 

56

particularly where, unlike with direct testimony, the survey respondent rendering 

an opinion on the habits of his co-workers is not even subject to cross-examination 

in court. See FED. R. EVID. 701 (except for expert testimony, testimony based on 

opinions or inferences is limited to those which are rationally based on the 

perception of the witness ). Indeed, the Fifth Circuit has excluded even direct 

testimony about the habits of a witness s co-workers. United States v. Carlock, 

806 F.2d 535, 552 (5th Cir. 1986). 

Third, the survey s questions were impossible for respondents to answer 

accurately and encouraged random guessing. Such requests to speculate are fatal 

to a survey s reliability. Scott Fetzer, 381 F.3d at 488. For example, the survey 

asked respondents to give their estimate of their fellow employees use of custom 

XML in Word 2003 and Word 2007, and instructed respondents that Your best 

estimate is fine. (A4248-58.) 

The survey also asked respondents to recall the percentage of computers per 

year starting in 2008 and going back five years that had been used to open and 

save an XML document containing custom XML in the relevant file format. 

(A4252-58.) But just as this Court s IT specialists are unlikely to know, without 

specialized systems analysis, how many judges or law clerks access Word s 

Thesaurus or Track Changes features on a daily or yearly basis, the survey 

respondents had no means other than rank conjecture to know offhand how often 

57

the custom XML functionality might have been accessed within their respective 

organizations. Merely because a person helps install Word on computers does not 

mean he or she knows how the end users actually use Word. 

Fourth, not only were the respondents not in a position to know anything 

reliable about the use of custom XML, but many of the 19 respondents who 

reported custom XML usage did not even understand the questions. Questions that 

are too confusing or difficult for respondents disqualify a survey as admissible 

evidence. See Jackson v. Nat’l Action Fin. Servs., Inc., 441 F. Supp. 2d 877, 881 

(N.D. Ill. 2006). One typical example: One respondent claimed that, although 

only 2 computers ran Word 2007, 5% of them had opened an XML document 

even though there is no such thing as 5% of 2 computers. (A4262 (cols. Q1A, 

Q1B, row 40).) Still another respondent claimed that, in a typical workday in 

2008, 75% of computers used Word 2003 to open an XML document, but in the 

entire year 2008, none did. (A4262 (col. Q2B, row 18), A4265 (col Q4C, row 

18).) i4i asked the district court to turn a blind eye to these and many other 

nonsensical and irreconcilable answers because Wecker had corrected the clearly 

mistaken answers through data imputation e.g., by converting 3% to 3 

computers. (A4602-03.) But even if it were acceptable for a surveyor to 

correct answers (which is to say, make them up) rather than recognizing that the 

survey was unclear and discarding it, for many of the 19 respondents, there was no 

58

conceivable way to logically reconcile the answers. If a company has only 2 

computers, for example, neither 5 computers nor 5% of computers will solve 

the problem. Even more striking, Wecker stated that when a respondent had given 

two inconsistent answers, he always chose the larger number (A1609-10), even if 

there was no way of knowing whether the smaller or the larger number was 

actually correct. 

Fifth, the survey had an incredibly low response rate less than 5%, which 

is well below the 50 percent response rate that is considered minimally 

acceptable. Albert, 234 F. Supp. 2d at 106 n.6. It is no secret that low response 

rates often skew surveys through selection bias. If the response rate drops below 

50%, the survey should be regarded with significant caution. REFERENCE 

MANUAL ON SCIENTIFIC EVIDENCE, FEDERAL JUDICIAL CENTER 245 (2d ed. 2000). 

Sixth, a survey is useful to aggregate very large datasets through statistical 

sampling and other means. A report summarizing what 19 people estimated 

others might have been doing is not a survey at all it is simply a summary of 

inadmissible hearsay. No state of mind exception can save it, as that exception 

must be based on a witness s actual perception, not his speculation about his 

coworkers habits. See generally Schering Corp. v. Pfizer Inc., 189 F.3d 218 (2d 

Cir. 1999) (Sotomayor, J.). 

59

Given all of these errors, the district court abused its discretion in refusing to 

exclude the Wecker survey. 

B. Wagner’s Georgia-Pacific Analysis Should Have Been 

Excluded 

It is well-settled that experts must use reliable methodologies rather than 

simplistic extrapolation and childish arithmetic with the appearance of authority by 

hiring a professor to mouth damages theories that make a joke of the concept of 

expert knowledge. Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 415 

(7th Cir. 1992). i4i s derivation of the royalty rate of $98 per unit in this case an 

astonishingly high figure that exceeds the entire price of certain editions of Word, 

and is based on an analysis that linked the royalty rate to the price of a high-end 

third-party XML editor that has not even been claimed to practice the patent 

vividly epitomizes such abuse of expert testimony and a district court s failure to 

police it. Because the district court s discretion regarding the admissibility of 

expert testimony is not a carte blanche justifying its complete abdication of its 

gatekeeping role under Daubert, its decision must be reversed. 

i4i s expert purported to apply the Georgia-Pacific analysis, which seeks to 

estimate the price that Microsoft would have paid i4i in an arm s length bargain. 

That framework requires an expert to establish, among others, the value of the 

patent to Microsoft and its customers, identify the available alternatives to 

licensing the patent, and then estimate the portion of the patent s value that 

60

Microsoft would be willing to pay in light of the economic relationship between 

the patented method and noninfringing alternative methods. Riles v. Shell 

Exploration & Prod. Co., 298 F.3d 1302, 1312 (Fed. Cir. 2002). As shown below, 

Wagner analyzed virtually no evidence about these material factors. This alone 

requires reversal. Integra Lifesciences I, Ltd. v. Merck KGaA, 331 F.3d 860, 869- 

72 (Fed. Cir. 2003) (vacated on other grounds) (reversing award that did not 

appear to take into account numerous factors ). 

Instead, Wagner based his outsized royalty on a high-end third party XML 

editor not shown to practice the patent, and then assumed that Microsoft would be 

willing to pay i4i 25% of the hypothetical profits it might make if it charged $499 

for Word. (See A3940-46.) This ipse dixit warrants reversal under Daubert. 

Not only is the 25% rule-of-thumb itself problematic for widely acknowledged 

reasons (see, e.g., Richard S. Toikka, Patent Licensing Under Competitive and 

Non-Competitive Conditions, 82 J. Pat. & Trademark Off. Soc y 279, 292-93 

(2000)), but its complete distortion in this case through linkage to the value of a 

third-party s product but Microsoft s profit margin bears no resemblance to what 

the rule was intended for, much less any resemblance to Georgia-Pacific. 

First, Wagner erroneously used as his starting point a high-end XML editor 

marketed to a small subset of professionals that costs three times as much as some 

versions of Word, does not practice the patented process, and includes a plethora of 

61

functionalities beyond the patented invention and beyond Word s additional, 

noninfringing capabilities, as is reflected in its far higher ($499) market price. 

(A1467-68; A3938, A3943-44; see also A5599-5621.) 

Wagner justified his reliance on XMetaL by pointing to an e-mail from a 

Microsoft employee identifying XMetaL as one of Microsoft s competitors in the 

XML (not the custom XML) field. (A3943 & n.62; A1387-88.) He appears to 

have done no market research beyond that. (A1467-69.) He admitted that he did 

not know the average selling price of XMetaL or even whether anyone actually 

pays the list price for XMetaL, and he conceded that XMetaL includes lots of 

functionalities that have nothing to do with opening documents containing custom 

XML and Word. (A1468-69.) But he nevertheless concluded that Microsoft 

would come to the hypothetical bargaining table valuing the 449 Patent as if it 

alone would enable Microsoft to market a $499 high-end, specialized product 

even if Microsoft cannot even sell the thousands of noninfringing functionalities in 

Word for about a third of that price. (A1389-90.) It is completely illogical to 

assume that Microsoft would ever agree to a benchmark based on such expensive 

specialized software. 

To be sure, it may be proper in certain cases to benchmark a reasonable- 

royalty analysis to the price of a third-party product so as to identify the patent s 

value independent of other functionalities in the defendant s product. But to use 

62

such a benchmark, the entire value of that benchmark product must be attributable 

to the patent. Here, however, not only does the record lack any evidence as to 

whether XMetaL has the capability to practice i4i s method, but XMetaL has 

numerous functionalities beyond opening and saving XML files, and so it cannot 

possibly serve as a proxy for the value of the 449 Patent to Microsoft without 

violating the entire market value rule. 

What is more, Wagner had access to far more relevant and specific evidence 

of the value of custom XML to Microsoft, but chose to ignore it. He stated in his 

report that it appears that custom XML support was a major factor accounting 

for the $50 price difference between two versions of Office, one of which did not 

include custom XML. (A3962.) This $50 difference therefore shows that 

Microsoft and the market cannot attach more than $50 in value to custom XML, 

but even that overstates the value because not all uses of custom XML are alleged 

to infringe. 9 Even correcting for this single error and accepting all the rest of i4i s 

theories, the per-unit royalty would be 25% of $50, and the overall damages would 

have been $20 million. 

9 In addition, it was not shown that the full $50 was solely attributable to the 

allegedly infringing functionality. For example, Office Professional contains 

Access, while Small Business does not. (A3938.) 

63

Second, Wagner should not have applied the so-called 25% Rule, which 

anchored the Georgia-Pacific analysis to the factually unsupportable assumption 

that i4i could successfully demand a 25% cut of the profits in a hypothetical 

negotiation. 

Word s custom XML functionality permits users not only to perform the 

accused process of opening and saving custom XML files but also to use Word s 

hundreds of word-processing tools to edit documents containing XML and/or 

custom XML. In addition, a large part of the functionality s value reflects the cost 

of writing the high-quality software necessary to perform these tasks. i4i s patent, 

addressed to a method, not the actual software, provides thus at best a miniscule 

part of the value of the custom XML functionality. In this context, where the 

patent represents a fraction of the inputs into the accused functionality, it blinks 

reality to suggest that the infringer would pay a quarter of its anticipated profits on 

the technology to the patent holder. In fact, even Wagner conceded that it is 

problematic to use the 25-percent rule in such a case because it s very difficult 

to differentiate the contribution of the asserted patent from the contributions of all 

the other technologies included in the product. (A1453.) 

In addition, as XMetaL itself demonstrates, the 449 Patent was not 

necessary to developing the custom XML functionality. Many XML editors are 

available that no one alleges infringe the patent. When Microsoft came to the 

64

hypothetical bargaining table, then, it would have weighed the cost of licensing the 

449 Patent against its potential to develop the necessary technology in-house or to 

license it from another patent holder. See Riles, 298 F.3d at 1312. Microsoft 

routinely faces this choice. The record evidence demonstrates that for similar 

patents Microsoft has agreed to a lump-sum payment in the $1-5 million range. 

(A4793-95; see also A2188-97.) It cannot possibly be true that Microsoft would 

suddenly pay $200,000,000 for a technology that could have been obtained 

elsewhere or developed in-house for a much smaller sum. 

For these reasons, the district court should have excluded Wagner s 

reasonable-royalty analysis. Although the hypothetical-negotiation analysis can 

never be totally precise, it must bear some relation to the real world. [N]othing in 

either Daubert or the Federal Rules of Evidence requires a district court to admit 

opinion evidence that is connected to existing data only by the ipse dixit of the 

expert. Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997). That is because an 

expert s use of a general methodology cannot vindicate a conclusion for which 

there is no underlying [factual] support. Black v. Food Lion, Inc., 171 F.3d 308, 

314 (5th Cir. 1999). Because Daubert has tasked the court not the jury to 

perform the gatekeeping role, the district court s abdication from that role requires 

reversal. Indeed, one can hardly expect the jury to reach the proper decision based 

on cross-examination when the admission of improper damages testimony led to 

65

the usual magic tricks, Isaksen v. Vt. Castings Inc., 825 F.2d 1158, 1165 (7th 

Cir. 1987), as Wagner dazzled the jury with an array of figures conveying a 

delusive impression of exactness, Olympia Equip. Leasing Co. v. W. Union Tel. 

Co., 797 F.2d 370, 382 (7th Cir. 1986). 

C. Two Hundred Million Dollars Is Not A Reasonable Royalty 

The enormous damages award of $200,000,000 is insupportable by the 

results-oriented analysis provided by i4i s experts, regardless of that testimony s 

admissibility, and cannot possibly qualify as a reasonable royalty. This Court 

should either remit the damages to a reasonable sum or remand for a new trial, 

because the damages verdict is clearly excessive. See King v. Ames, 179 F.3d 370, 

377 n.8 (5th Cir. 1999). 

Section 284, which authorizes the award of a reasonable royalty, prohibits 

a damages award that is in view of all the evidence, ... so outrageously high ... as 

to be unsupportable as an estimation of a reasonable royalty. Lindemann 

Maschinenfabrik GmbH v. Am. Hoist & Derrick Co., Harris Press & Shear Div., 

895 F.2d 1403, 1406 (Fed. Cir. 1990); see 35 U.S.C. § 284. Although expert 

testimony plays an important role, there is also room for exercise of a common- 

sense estimation of what the evidence shows would be a reasonable award. 

Lindemann, 895 F.2d 1406. 

66

This Court has not hesitated in the past to reverse speculative or otherwise 

unsupportable damages awards in patent-infringement cases. See, e.g., Integra 

Lifesciences, 331 F.3d at 869-72 (reversing $15 million reasonable-royalty award 

that did not appear to take into account numerous factors that would considerably 

reduce the value of a hypothetical license ); Oiness v. Walgreen Co., 88 F.3d 1025, 

1028-34 (Fed. Cir. 1996) (reversing jury award of $11 million to patent holder for 

past and projected lost profits as speculative ). 

The result should be no different here. No evidence could justify a royalty 

equal to more than half of the gross revenue per infringing user in exchange for a 

single infringing functionality, particularly for a software like Word that has 

thousands of other functionalities. It follows a fortiori that the deeply flawed 

expert testimony in this case, relying as it did on abject speculation and 

unsupported assumptions, is insufficient to justify the award. A royalty, after all, 

must be supported by relevant evidence. Unisplay, S.A. v. Am. Elec. Sign Co., 

69 F.3d 512, 518 (Fed. Cir. 1995). The award in this case is a product not of any 

good-faith attempt to assess the value of the patent but rather a poorly refereed trial 

in which the plaintiffs were permitted to submit completely unsubstantiated 

conclusions to the jury under the guise of expert testimony. 

67

Accordingly, this Court should remit the damages to the $5,000,000 that 

Microsoft generally will pay to license a patent. In the alternative, this Court 

should remand for a new trial on damages. 

D. The District Court’s Award Of $40 Million In Enhanced 

Damages Is Unsupportable. 

Based on the jury s finding of willful infringement, Microsoft s size and 

profitability, and the court s extraordinary conclusion that, in advocating for his 

client, Microsoft s trial counsel had committed trial misconduct (A47), the 

district court decided to enhance i4i s already outrageous $200,000,000 damage 

award by an additional $40,000,000. Microsoft was entitled to judgment as a 

matter of law on the issue of willfulness. But even if that were not the case, the 

Court s enhancement analysis is premised on errors of law and accordingly must 

be vacated. 

1. The District Court’s Willfulness Analysis Cannot Be 

Reconciled With Seagate 

A finding of willful infringement requires a showing by clear and 

convincing evidence that the infringer acted despite an objectively high likelihood 

that its actions constituted infringement of a valid patent, and that this 

objectively-defined risk was either known or so obvious that it should have 

been known to the accused infringer. In re Seagate Techs., LLC, 497 F.3d 1360, 

1371 (Fed. Cir. 2007). 

68

Microsoft, as discussed above, did not have knowledge of the patent; 

therefore, the district court s conclusion that Microsoft s conduct satisfied 

Seagate s subjective prong is insupportable. 

But the district court s objective analysis is even more glaringly 

erroneous. An objective observer in Microsoft s position would not have found a 

high likelihood that the 449 Patent was valid and infringed by Word s custom 

XML functionality. This is amply demonstrated by the facts that: (1) one 

objective observer, the district court, invalidated 13 claims of the patent as 

indefinite (A86); (2) another objective observer, the PTO, has now provisionally 

invalidated the Asserted Claims (A4466); (3) the jury s finding of infringement 

rests on a claim construction that is sharply at odds with the 449 Patent s 

prosecution history; (4) i4i itself took at least three years from late 2002 (when 

i4i first obtained beta versions of Word 2003) until late 2005 to determine that 

it had a viable claim for infringement, and another year-and-a-half for it to actually 

assert infringement (A61-62); 10 and (5) i4is only evidence to rebut the 

documentary and third-party evidence of an on-sale bar is the inventors 

10 See Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 

2008) (patentee s successful ... laches defense that it did not perceive a 

problem for several years precluded finding of willful infringement). 

69

conclusory trial testimony, which could not have been known to anyone until trial 

took place. 

Although the district court accused Microsoft of advocating an overly 

broad reading of Seagate (A20), it is the court s reading of Seagate not 

Microsoft s that was in error. 

The district court s willfulness decision is predicated on three significant 

errors of law, each of which is an independently sufficient basis for vacating the 

district court s $40,000,000 award of enhanced damages. 

First, the court found that Microsoft s invalidity and noninfringement 

defenses were irrelevant to the objective prong of the Seagate analysis indeed, 

irrelevant and inappropriate because they would [not] have been apparent and 

considered by a reasonable person in Microsoft s position prior to its infringing 

activity. (A21-22.) But this construction of Seagate s objective prong cannot be 

reconciled with this Court s post-Seagate precedents, which uniformly look to the 

strength of an infringer s defenses regardless of when those defenses were 

developed as part of Seagate s objective analysis. Under [Seagate s] objective 

standard, both legitimate defenses to infringement claims and credible invalidity 

arguments demonstrate the lack of an objectively high likelihood that a party took 

actions constituting infringement of a valid patent. Black & Decker, Inc. v. 

Robert Bosch Tool Corp., 260 F. App x 284, 291 (Fed. Cir. 2008). And this Court 

70

has consistently applied that rule to reject willfulness where, such as here, 

legitimate defenses of claim construction or invalidity are presented. See, e.g., 

Cohesive Techs., Inc. v. Waters Corp., 543 F.3d 1351, 1374 (Fed. Cir. 2008) 

(willfullness appropriately rejected where claims of patent-in-suit are susceptible 

to a reasonable construction under which [the defendant s] products did not 

infringe ). 

Moreover, the court s crabbed construction of Seagate conflicts with its own 

expansive inferences of knowledge of a patent. If a jury is entitled to infer a 

defendant s knowledge of a patent s contents, fairness dictates that the jury must 

also infer knowledge of available defenses to an allegation of infringement. The 

Court cannot permit the jury to infer knowledge of potential theories of 

infringement but demand that it be blinded to their defenses. 

Second, the district court did not independently analyze the strength of 

Microsoft s defenses, instead allowing the fact that they were rejected wholesale 

by the jury and the size of the verdict to dictate the conclusion that the defenses 

were not objectively reasonable. Of course, if the jury s conclusion alone were 

sufficient, there would be no need for a willfulness analysis at all; the court could 

skip straight to enhancement. But this Court has recognized that [t]he mere fact 

that the jury ultimately found [infringement] does not diminish the difficulty of 

their task, which must be viewed objectively. Depuy Spine, Inc. v. Medtronic 

71

Sofamor Danek, Inc., 567 F.3d 1314, 1337 (Fed. Cir. 2009). Thus, in Black & 

Decker, this Court held that to avoid a finding of willfulness, an accused 

infringer s defenses do not need to be successful; they need only be legitimate or 

credible. 260 F. App x. at 291. 

Third, the court chastised Microsoft for advocating an application of Seagate 

that would allow an accused infringer with knowledge of a patent number to 

remain ignorant of its contents. (A20.) But this is the central command of Seagate 

itself; there is no longer an affirmative duty of due care. 497 F.3d at 1371. 

2. The District Court’s Enhancement Analysis Fails On 

Its Own Terms 

At least three additional errors infect the district court s enhancement 

analysis. Any one of the errors justifies vacatur of its $40,000,000 award of 

enhanced damages. 

First, the district court s enhancement is predicated principally on 

Microsoft s lack of due care with regard to avoiding infringement and its failure 

to conduct any investigation regarding the patent or i4i s products. (A42, A44; 

see also A45.) But as discussed above, Seagate abrogated the duty to investigate 

previously placed upon those with knowledge of a patent. See Seagate, 497 F.3d at 

1371 ( we abandon the affirmative duty of due care ). 

Second, though the district court recognized that [e]nhanced damages are a 

punitive measure to penalize a willful infringer for his or her increased culpability 

72

(A42-43), the court weighed in favor of enhancement the facts that it is 

undisputedly, the worldwide leader in software for personal and business 

computing and that Microsoft s 2008 revenue was $60.42 billion. (A44.) But 

Microsoft s success as a business say[s] nothing about [its] culpability [as] the 

infringer. Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570 (Fed. Cir. 1996). The 

defendant s financial condition is relevant, if at all, only to the extent of 

enhancement, Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992), not 

to whether to enhance damages. (A43.) Since all litigants are equal in our civil 

justice system, the Due Process Clause prohibits punishing a defendant based on its 

wealth. Honda Motor Co. v. Oberg, 512 U.S. 415 (1994). 

Third, the district court erred in holding that Microsoft s counsel s 

litigation conduct favor[ed] enhancement. This Court has been absolutely clear 

that attorney misconduct during litigation is not sufficient for an increased 

damages award under section 284 because, like a defendant s financial condition, 

it say[s] nothing about the culpability of the infringer. Read Corp., 970 F.2d at 

826. 

Moreover, the conduct cited by the district court was not at all inappropriate. 

Indeed, when the assertedly improper arguments were made at trial, i4i found no 

cause to object. Perhaps that is because Microsoft s argument that i4i and its 

litigation investors had brought the litigation to achieve liquidity was obviously 

73

and inescapably true in light of i4i s claim for $200,000,000 in damages and the 

belated request for injunctive relief. Microsoft was obligated to build a record at 

trial showing that i4i s technology had no proven value in the marketplace and that 

i4i L.P. has no business other than litigation. The district court might not have 

liked the implications of those facts, but careful examination of the record will 

show that, contrary to what the out-of-context statements cited by the district court 

may suggest, Microsoft never argued that simply asserting a patent in these 

circumstances was improper. Microsoft s argument, which is undeniably 

appropriate, was that it was improper for i4i to bring a baseless lawsuit simply in 

an attempt to achieve liquidity, particularly where the inventors had studied the 

accused software and not found infringement. (A625-27; A712-13; A722; A2452- 

58; 2503-06; A802; A1703-09.) And to the extent that i4i also found Microsoft s 

allusions to bankers and bailouts unobjectionable, perhaps it is because, if such an 

objection were sustained, ordinary application of the goose-gander rule would 

likewise prohibit i4i from referring to Microsoft as by far the biggest software 

company in the world and informing the jury of the irrelevant fact that $200 

million represents this tiny fraction of Microsofts profits. (A697, A710.) 11 

11 In fact, i4i s own expert violated a motion in limine by referring to Microsoft s 

monopoly, with only perfunctory admonishment by the court upon Microsoft s 

objection. (A1451-52, A1517-19.) 

74

Affirming the district court s award of $40,000,000 will force alleged infringers to 

choose between rebutting the patentee s case and risking an award of enhanced 

damages. 

V. The Award Of Injunctive Relief In This Case Conflicts With eBay 

[I]njunctive relief is an extraordinary remedy. Silverstein v. Penguin 

Putnam, Inc., 368 F.3d 77, 83-84 (2d Cir. 2004) (vacating a permanent injunction). 

Thus, an injunction is to be used sparingly, and only in a clear and plain case. 

Rizzo v. Goode, 423 U.S. 362, 378 (1976). As demonstrated below and discussed 

more fully in Microsoft s motion to stay, i4i has failed to make the requisite 

showing on each of the four eBay factors. See eBay Inc. v. MercExchange, L.L.C., 

547 U.S. 388, 391 (2006). 

Irreparable Harm. The district court premised its irreparable-harm finding 

on i4i s conclusory statements regarding generic harm that might arise from 

infringement by an (alleged) direct competitor, such as loss of reputation, loss of 

market share, and loss of customers. (A52-54.) Such generic assertions of harm 

are legally inadequate. Indeed, if such bare-bones allegations of competitive harm 

were all that the law required, every successful infringement action involving 

competitors would result in an automatic injunction a result expressly rejected by 

the Supreme Court in eBay. 

75

Rather, to satisfy its burden under eBay, i4i had to provide concrete, non- 

conclusory evidence of the harm that would occur absent an injunction. i4i utterly 

failed to meet this burden it did not even offer any evidence about the parties 

respective market shares, let alone attempt to prove the market share it has lost (or 

projects to lose) as a result of Microsoft s infringement. Indeed, the only evidence 

in the record shows that while i4i consistently lost millions of dollars before 

Microsoft introduced Word 2003, i4i s revenues actually improved after Word 

2003 was released. (A907-12.) And although i4i identified two customers that it 

lost years ago, they were not lost as a result of the infringement. Rather, one 

customer (FDA) was lost to a third competitor (Grumman), and the other (PTO) 

was lost because of quality problems with i4i s product. (A1675-76, A1718-20.) 

And i4i did not even attempt to prove that customers prefer Word because of its 

ability to perform the accused method, as opposed to a desire for other 

[noninfringing] features of the [accused] system. Sundance, Inc. v. DeMonte 

Fabricating Ltd., No. 02-73543, 2007 WL 37742, at *2 (E.D. Mich. Jan. 4, 2007). 

Because i4i failed to connect its purported harm to Microsoft s infringing conduct, 

the district court had no basis to conclude that i4i will be harmed absent an 

injunction against that conduct. Id. 

Nor did i4i present a shred of evidence on its alleged loss of brand 

recognition; rather, it simply asked the court to presume such a loss from the mere 

76

fact that Microsoft has entered the XML-editor market. (A4626.) But such 

conjectural assertions fail as a matter of law. See Roper Corp. v. Litton Sys., 

Inc., 757 F.2d 1266, 1273 (Fed. Cir. 1985). 

In any event, whatever losses i4i might have proved, they all occurred in the 

past. Indeed, i4i adduced no evidence that it will lose future sales or revenues as a 

result of infringement, and it is undisputed that i4i s current product is an add-on or 

plug-in to Word and requires Word to operate (A885-88). Thus, i4i is not currently 

in competition with Microsoft, but in a complementary vertical relation to it. (See 

also A1027-28 (K. Thomas, i4i s Product Strategist, admitting no competition); 

A1479-80; see also A6037-40.) The district court acknowledged the absence of 

future harm in light of the fact that i4i s product and Word are currently 

complementary, rather than competing, but deemed it irrelevant, focusing instead 

on harm that i4i allegedly suffered several years ago. (A53-54 (holding that the 

fact that i4i s product does not currently compete with Word because it is merely 

an add-on to Word does not negate the injury incurred previously or show that 

i4i has not suffered an irreparable injury ).) It is axiomatic, however, that 

injunctive relief is not available to remedy an injury that occurred in the past. See 

United States v. Or. State Med. Soc., 343 U.S. 326, 333 (1952) ( The sole function 

of an action for injunction is to forestall future violations. It is [] unrelated to 

77

punishment or reparations for those past. ); Dombrowski v. Pfister, 380 U.S. 479, 

485 (1965) ( injunctive relief looks to the future ). 

Inadequacy of Monetary Relief. It is well-established that, in all but the 

rarest of circumstances, economic injuries are remediable with monetary or legal 

damages, including an ongoing royalty. See Sampson v. Murray, 415 U.S. 61, 90 

(1974) ( Mere injuries, however substantial, in terms of money ... are not enough 

to warrant injunctive relief); Paice LLC v. Toyota Motor Corp., 504 F.3d 1293 

(Fed. Cir. 2007) (ongoing royalty). But instead of requiring i4i to show why 

money damages are incalculable, the district court inexplicably faulted Microsoft 

for not presenting evidence on alternative methods for compensating i4i for loss 

of customers, market share, and brand recognition. (A55.) It was (and remains) 

i4i s burden to prove, however, the insufficiency of legal relief; its failure to carry 

that burden alone warrants vacatur of the injunction. See, e.g., Praxair, Inc. v. 

ATMI, Inc., 479 F. Supp. 2d 440, 444 (D. Del. 2007) (patentee must explain why 

it may have difficulties calculating damages going forward and why money 

damages cannot compensate for lost market share ). 

Balance of Equities. Given that i4i does not even have a stand-alone product 

that could compete with Word on the market, while Microsoft would lose its 

significant investments in creating the custom XML functionality of Word and 

would have to invest significant resources in redesigning it, the balance of the 

78

equities plainly favors Microsoft. Moreover, where, as here, a patent allegedly 

covers only one of a multitude of functionalities of an accused product, an 

injunction may be inequitable. See eBay, 547 U.S. at 396-97 (Kennedy, J., 

concurring). 

Public Interest. In conflict with well-established precedent, the district court 

focused its public-interest inquiry exclusively on public health and welfare 

considerations. But far from being restricted to those rarely implicated concerns, 

the public interest is a supple principle, R.R. Comm’n v. Pullman Co., 312 U.S. 

496, 500 (1941), for which courts of equity should go much farther both to give 

and withhold relief than they are accustomed to go when only private interests are 

involved. Virginian Ry. Co. v. Sys. Fed’n, 300 U.S. 515, 552 (1937). 

The district court overlooked the significant public interest that disfavors 

injunctions based on patents whose validity is in significant doubt, such as those as 

to which the PTO has granted reexamination. Cardinal Chem. Co. v. Morton Int’l, 

508 U.S. 83, 100 (1993) (recognizing the strong public interest in resolving 

questions of patent validity ). Indeed, while the public interest favors enforcement 

of valid patents, the public is just as harmed by the enforcement of invalid patents. 

Pope Mfg. Co. v. Gormully, 144 U.S. 224, 234 (1892); Lear, Inc. v. Adkins, 395 

U.S. 653, 670 (1969). Injunctive relief is especially inappropriate and the public- 

interest effects are especially pernicious where, as here, the patent challenger was 

79

equired to prove invalidity by clear and convincing evidence despite relying on 

references not before the PTO. The public interest thus favors a final and better- 

tested determination of validity before Microsoft and its distributors are forced to 

incur additional costs in redesigning Word (and removing the current copies of 

Word from the market). The district court s unduly narrow conception of the 

public interest including its failure to consider the effect of the reexamination on 

the public interest is an abuse of discretion, and thus requires vacatur. Cf. Piper 

Aircraft Co. v. Reyno, 454 U.S. 235, 257 (1981) (a district court abuses its 

discretion when it fails to consider all relevant public ... interest factors ). 

CONCLUSION 

The injunction should be vacated. The judgment should be reversed and the 

case remanded with instructions to enter judgment of noninfringement and 

invalidity. In the alternative, the judgment should be vacated and the case 

remanded for a new trial on all issues as to which Microsoft is not entitled to 

judgment. 

80

ADDENDA

2009-1504 

IN THE 

UNITED STATES COURT OF APPEALS 

FOR THE FEDERAL CIRCUIT 

i4i LIMITED PARTNERSHIP and 

INFRASTRUCTURES FOR INFORMATION INC., 

v. 


Plaintiffs-Appellees, 

Defendant-Appellant. 

Appeal from the United States District Court for the Eastern District of 

Texas in case no. 07-CV-113, Judge Leonard Davis. 

BRIEF FOR i4i LIMITED PARTNERSHIP AND 

INFRASTRUCTURES FOR INFORMATION INC. 

Douglas A. Cawley 

Jeffrey A. Carter 

MCKOOL SMITH, P.C. 

300 Crescent Court, Ste. 1500 

Dallas, TX 75201 

(214) 978-4000 

T. Gordon White 

MCKOOL SMITH, P.C. 

330 West 6th St., Ste. 1700 


(512) 692-8700 


Donald R. Dunner 

Don O. Burley 

Kara F. Stoll 

Jason W. Melvin 

FINNEGAN, HENDERSON, FARABOW, 

GARRETT & DUNNER, L.L.P. 

901 New York Avenue, NW 

Washington, DC 20001 

(202) 408-4000 

Erik R. Puknys 


GARRETT & DUNNER, L.L.P. 

3300 Hillview Avenue 

Palo Alto, CA 94304 

(650) 644-6644 

Attorneys for Plaintiffs-Appellees 

i4i Limited Partnership and 

Infrastructures for Information Inc.

CERTIFICATE OF INTEREST 

Counsel for Plaintiffs-Appellees i4i Limited Partnership and Infrastructures 

for Information Inc. certify the following: 

1. The full name of every party or amicus represented by us is: 

i4i Limited Partnership and Infrastructures for Information Inc. 

2. The name of the real party in interest (if the party named in the caption is not 

the real party in interest) represented by us is: 

N/A. 

3. All parent corporations and any publicly held companies that own 10% or 

more of the stock of any party represented by us are: 

None. 

4. The names of all law firms and the partners or associates that appeared for 

the parties now represented by us in the trial court or are expected to appear 

in this Court are: 

Mike McKool, Jr., Douglas A. Cawley, Jeffrey A. Carter, 

Jill F. Lynch, Thomas G. Fasone III, Jennifer L. Henry, 

Martin C. Robson III, J. Austin Curry, and Jonathan R. Yim 

MCKOOL SMITH, P.C., DALLAS, TX 

T. Gordon White, Kevin L. Burgess, John B. Campbell, 

Gretchen K. Harting, and Joel L. Thollander 

MCKOOL SMITH, P.C., AUSTIN, TX 

Sam F. Baxter 

MCKOOL SMITH, P.C., MARSHALL, TX 

Robert M. Parker, Charles Ainsworth, and Andrew T. Gorham 

PARKER BUNT & AINSWORTH P.C., TYLER, TX 

Thomas J Ward, Jr. 

WARD & SMITH LAW FIRM, LONGVIEW, TX 

i

Donald R. Dunner, Don O. Burley, Kara F. Stoll and Jason W. 

Melvin 

FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, 

L.L.P., WASHINGTON, DC 


FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, 

L.L.P., PALO ALTO, CA 

ii

TABLE OF CONTENTS 

Certificate of Interest ................................................................................................. i� 

Table of Authorities ................................................................................................ vii� 

Table of Abbreviations............................................................................................. xi� 

Statement of Related Cases ..................................................................................... xii� 

I.� Statement of the Issues .................................................................................... 1� 

II.� Statement of the Case ...................................................................................... 4� 

A.� Preliminary Statement ........................................................................... 4� 

B.� The Parties and Their Products ............................................................. 8� 

C.� Course of Proceedings and Disposition Below ..................................... 9� 

III.� Statement of Facts ............................................................................................ 9� 

A.� Electronic Document Markup ............................................................... 9� 

B.� i4i s Early Efforts with Electronic Document Processing .................. 10� 

C.� The 449 Patent ................................................................................... 13� 

1.� The 449 Patent s Specification ................................................ 13� 

a.� The Invention s Creation of Distinct Metacode 

Maps and Mapped Content ...................................... 13� 

b.� The Invention Performs Automatic Updating of 

Metacode Maps After Changes to the Content .............. 15� 

c.� The Invention Allows, But Does Not Require, 

Restriction of a User s Access to One Portion of a 

Document ........................................................................ 15� 

2.� The 449 Patent s Prosecution .................................................. 16� 

3.� The Asserted Claims ................................................................. 18� 

iii

D.� Microsoft Recognizes the Commercial Significance of i4i s 

Invention .............................................................................................. 19� 

E.� Microsoft Decides to Create Its Own XML Editor and Render 

i4i s Obsolete ................................................................................... 22� 

F.� Microsoft Destroys the Market for i4i s Product ................................ 24� 

G.� i4i Sues Microsoft for Infringement .................................................... 25� 

1.� Claim Construction ................................................................... 25� 

2.� Trial ........................................................................................... 27� 

a.� Infringement ................................................................... 27� 

b.� Invalidity ......................................................................... 30� 

c.� Damages ......................................................................... 34� 

3.� The Jury s Verdict ..................................................................... 38� 

4.� The District Court s Injunction and Award of Enhanced 

Damages .................................................................................... 39� 

IV.� Summary of Argument .................................................................................. 41� 

V.� Argument ....................................................................................................... 45� 

A.� Standard of Review ............................................................................. 45� 

B.� Because the District Court Correctly Construed the Claims, the 

Infringement Verdict Must Stand ........................................................ 46� 

1.� Microsoft s Attempt to Require Independent 

Manipulation Directly Contradicts the Patent s Teachings ...... 46� 

2.� There Is No Basis for Limiting the Claims to Separate 

Files ......................................................................................... 48� 

3.� The Correct Construction Requires Affirmance, But Even 

Under Microsoft s Construction, Disputed Issues of Fact 

Would Remain .......................................................................... 50� 

iv

C.� The District Court Properly Refused to Overturn the Jury s 

Findings that the Patent Is Not Invalid ................................................ 50� 

1.� Microsoft Waived Its Challenge to Issues of Fact 

Relating to Prior Art Other Than Anticipation by SEMI- 

S 4 ............................................................................................... 51� 

2.� Substantial Evidence Supports the Jury s Determination 

That SEMI-S 4 Did Not Invalidate the Claims .......................... 53� 

3.� The District Court Did Not Abuse its Discretion by 

Preventing Microsoft from Arguing to the Jury that the 

PTO s Grant of a Reexamination Supported Invalidity ........... 57� 

4.� Microsoft Provides No Reason to Overturn the Clear and 

Convincing Standard for Invalidity .......................................... 57� 

D.� The Jury s Finding of Indirect Infringement Relied on Proper 

Instruction from the District Court and Sound Evidentiary 

Support ................................................................................................ 58� 

1.� Microsoft Misapplies this Court s Cases to Argue that 

Sellers of Software Will Always Avoid Contributory 

Infringement .............................................................................. 58� 

2.� The Question of Substantial Noninfringing Uses 

Considers Word s Custom-XML Functionality, Not All 

of Word ..................................................................................... 61� 

3.� Substantial Evidence Supports the Jury s Finding that the 

Accused Functionality of Word Does Not Have 

Substantial Noninfringing Uses ................................................ 63� 

4.� i4i Presented Evidence of Microsoft s Intent Sufficient to 

Support the Requisite Level for Contributory and 

Induced Infringement ................................................................ 64� 

E.� The Court Should Affirm the Damages Award .................................. 65� 

1.� Standard of Review ................................................................... 65� 

2.� The Wecker Survey Was Properly Admitted ........................... 66� 

v

3.� Wagner s Georgia-Pacific Analysis Was Properly 

Admitted .................................................................................... 69� 

4.� Microsoft Fails to Show Why the Royalty Is Excessive .......... 72� 

F.� The District Court Had Solid Grounds on Which to Enhance the 

Jury s Award of Damages ................................................................... 72� 

1.� The District Court Properly Refused to Overturn the 

Jury s Willfulness Finding in Light of i4i s Evidence .............. 72� 

2.� The District Court Relied on Entirely Proper Grounds to 

Enhance Damages ..................................................................... 75� 

G.� The District Court Did Not Abuse Its Discretion in Granting an 

Injunction ............................................................................................. 78� 

VI.� Conclusion ..................................................................................................... 84� 

vi

Cases� 

TABLE OF AUTHORITIES 

Amsted Industries, Inc. v. Buckeye Steel Castings Co., 

24 F.3d 178 (Fed. Cir. 1994) .............................................................................. 78 

Anchor Wall Sys., Inc. v. Rockwood Retaining Walls, Inc., 

340 F.3d 1298 (Fed. Cir. 2003) .......................................................................... 48 

Bose Corp. v. JBL, Inc., 

112 F. Supp. 2d 138 (D. Mass. 2000), 

aff d, 274 F.3d 1354 (Fed. Cir. 2001) ................................................................. 71 

Broadcom Corp. v. Qualcomm, Inc., 

543 F.3d 683 (Fed. Cir. 2008) ....................................................................... 7, 65 

Brookhill-Wilk 1, LLC, v. Intuitive Surgical, Inc., 

334 F.3d 1294 (Fed. Cir. 2003) .......................................................................... 47 

C.A. May Marine Supply Co. v. Brunswick Corp., 

649 F.2d 1049 (5th Cir. 1981) ............................................................................ 66 

Callaway Golf Co. v. Acushnet Co., 

No. 2009-1076, 2009 WL 2481986 (Fed. Cir. Aug. 14, 2009) .......................... 57 

Cardiac Pacemakers, Inc. v. St. Jude Med. Inc., 

No. 2007-1296, 2009 WL 2516346 (Fed. Cir. Aug. 19, 2009) .......................... 59 

Cohesive Techs., Inc. v. Waters Corp., 

543 F.3d 1351 (Fed. Cir. 2008) ................................................................... 72, 74 

Dahlen v. Gulf Crews, Inc., 

281 F.3d 487 (5th Cir. 2002) .............................................................................. 45 

Daubert v. Merrell Dow Pharmaceuticals, Inc., 

509 U.S. 579 (1993) ............................................................................................ 69 

DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 

469 F.3d 1005 (Fed. Cir. 2006) .......................................................................... 75 

DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 

567 F.3d 1337 (Fed. Cir. 2009) .......................................................................... 75 

vii

Duro-Last, Inc. v. Custom Seal, Inc., 

321 F.3d 1098 (Fed. Cir. 2003) .......................................................................... 51 

eBay Inc. v. MercExchange, L.L.C., 

547 U.S. 388 (2006) ............................................................................... 40, 78, 83 

Exxon Chem. Patents, Inc. v. Lubrizol Corp., 

137 F.3d 1475 (Fed. Cir. 1998) .......................................................................... 50 

Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys., 

350 F.3d 1327 (Fed. Cir. 2003) .......................................................................... 67 

Group One, Ltd. v. Hallmark Cards, Inc., 

407 F.3d 1297 (Fed. Cir. 2005) .......................................................................... 52 

Hodosh v. Block Drug Co., 

833 F.2d 1575 (Fed. Cir. 1987) .......................................................................... 62 

Hoffmann-La Roche, Inc. v. Promega Corp., 

33 U.S.P.Q.2d 1641 (N.D. Cal. 1994) ................................................................ 63 

Hybritech Inc. v. Monoclonal Antibodies, Inc., 

802 F.2d 1367 (Fed. Cir. 1986) .......................................................................... 57 

In re Seagate Techs., LLC, 

497 F.3d 1360 (Fed. Cir. 2007) ............................................................. 39, 72, 75 

Jurgens v. CBK, Ltd., 

80 F.3d 1566 (Fed. Cir. 1992) ................................................................. 7, 76, 77 

KSR Int l Co. v. Teleflex, Inc., 

550 U.S. 398 (2007) ............................................................................................ 51 

Micro Chemical, Inc. v. Lextron, Inc., 

317 F.3d 1387 (Fed. Cir. 2003) .......................................................................... 65 

Microsoft Corp. v. AT&T Corp., 

550 U.S. 437 (2007) ............................................................................................ 38 

Monsanto Co. v. McFarling, 

488 F.3d 973 (Fed. Cir. 2007) ............................................................................ 70 

viii

Northpoint Tech., Ltd. v. MDS America, Inc., 

413 F.3d 1301 (Fed. Cir. 2005) .......................................................................... 58 

Omega Eng g, Inc. v. Raytek Corp., 

334 F.3d 1314 (Fed. Cir. 2003) .......................................................................... 50 

Precision Specialty Metals, Inc, v. United States, 

315 F.3d 1346 (Fed. Cir. 2003) .......................................................................... 77 

Price v. Symsek, 

988 F.2d 1187 (Fed. Cir. 1993) .......................................................................... 56 

Read Corp. v. Portec, Inc., 

970 F.2d 816 (Fed. Cir. 1992) ............................................................... 39, 76, 77 

Ricoh Co. v. Quanta Computer, Inc., 

550 F.3d 1325 (Fed. Cir. 2008) ............................................................. 59, 61, 62 

Roper Corp. v. Litton Systems, Inc., 

757 F.2d 1266 (Fed. Cir. 1985) ................................................................... 80, 81 

SanDisk Corp. v. Memorex Prods., Inc., 

415 F.3d 1278 (Fed. Cir. 2005) .......................................................................... 47 

Scott Fetzer Co. v. House of Vacuums Inc., 

381 F.3d 477 (5th Cir. 2004) .............................................................................. 66 

SmithKline Beecham Corp. v. Apotex Corp., 

439 F.3d 1312 (Fed. Cir. 2006) .......................................................................... 46 

Soden v. Freightliner Corp., 

714 F.2d 498 (5th Cir. 1983) .............................................................................. 66 

Sulzer Textil A.G. v. Picanol N.V., 

358 F.3d 1356 (Fed. Cir. 2004) ................................................................... 45, 60 

U.S. Environmental Products, Inc. v. Westall, 

911 F.2d 713 (Fed. Cir. 1990) ............................................................................ 56 

Uniloc USA, Inc. v. Microsoft Corp., 

C.A. No. 03440S., 2009 WL 691204 (D.R.I. Mar. 16, 2009) ............................ 72 

ix

United States v. Carlock, 

806 F.2d 535 (5th Cir. 1986) .............................................................................. 67 

Voda v. Cordis Corp, 

536 F.3d 1311 (Fed. Cir. 2008) ..................................................................... 7, 64 

Walther v. Lone Star Gas Co., 

952 F.2d 119 (5th Cir. 1992) .............................................................................. 58 

Statutes� 

35 U.S.C. § 102(b) ................................................................................................... 51 

35 U.S.C. § 271(c) ........................................................................................... passim 

35 U.S.C. § 282 ........................................................................................................ 57 

Rules� 

Federal Rule of Evidence 703 .................................................................................. 66 

Other Authorities� 

Federal Judicial Center Reference Manual on Scientific Evidence 

(2d ed. 2000) ....................................................................................................... 66 

Merriam-Webster s Online Dictionary, 

available at http://www.merriam-webster.com/dictionary/material .................. 61 

x

Parties 

TABLE OF ABBREVIATIONS 

i4i Plaintiffs-Appellees i4i Limited Partnership and 

Infrastructures for Information, Inc. (collectively) 

i4i Inc. Infrastructures for Information, Inc. 

Microsoft Defendant-Appellant Microsoft Corporation 

Cites 

A__ Joint Appendix at page(s) __ 

MSBr.__ Brief for Defendant-Appellant Microsoft 

Corporation at page(s) __ 

WLFBr.__ Brief of Washington Legal Foundation as Amicus 

Curiae in Support of Defendant-Appellant 

Supporting Reversal at page(s) __ 

Terms 

449 patent U.S. Patent No. 5,787,449 

DeRose U.S. Patent No. 6,101,512 

Kugimiya U.S. Patent No. 5,587,902 

Mizuta U.S. Patent No. 5,280,574 

SGML Standard Generalized Markup Language 

XML eXtensible Markup Language 

xi

STATEMENT OF RELATED CASES 

No appeal in or from the same civil action or proceeding in the lower 

tribunal was previously before this or any other appellate court. Counsel is not 

aware of any case that may be directly affected by this Court s decision. 

xii

I. STATEMENT OF THE ISSUES 

1. The claimed invention is directed to a computer system for editing 

documents containing metacodes (information about how documents contents 

should be interpreted) so that the metacodes, which ordinarily are intermixed with 

the content when the document is displayed, are kept distinct from the content, in a 

metacode map, for editing and storage. 

a. Did the district court properly reject Microsoft s contention that 

the claims are limited to inoperable systems in which editing the document s 

content has no effect on its metacode map (or vice-versa), where the patent 

only describes systems wherein editing the document s content 

automatically changes the document s metacode map? 

b. Did the district court properly reject Microsoft s contention that 

the claims require a document s metacode map and content to be stored in 

different files (as opposed to distinct portions of memory), where the patent 

does not discuss any reason why separate files would be required (or even 

desirable) and the patent explicitly states that it can work on a document 

irrespective of its mode of storage ? 

2. Did the district court properly deny Microsoft s JMOL motion for 

noninfringement where: 

1

a. Microsoft s only reason for why it lacked certain limitations 

was based on the claim construction arguments (see issue 1) the court 

properly rejected; and 

b. Microsoft s indirect infringement defenses were either waived 

or rejected by the jury, which heard substantial evidence of Microsoft s 

intent and that the accused functionality lacked any substantial noninfringing 

uses? 

3. Did the district court properly deny Microsoft s JMOL and new-trial 

motions concerning invalidity where: 

a. Microsoft preserved only one invalidity attack in its pre-verdict 

JMOL motions; 

b. substantial evidence showed that the prior art Microsoft s attack 

depended on (a product sold by i4i that preceded the invention) lacked 

numerous claim limitations, including those related to the distinct editing 

and storage of metacodes; and 

limitations? 

c. the other prior art Microsoft relied on also lacked key claim 

4. Did the district court abuse its discretion in admitting survey evidence 

and expert testimony that formed the basis of i4i s damages claim, where: 

2

a. the survey was directed to 988 businesses, included screening 

questions to identify the most qualified people to respond to the survey, 

allowed respondents to answer don t know to any question, and assumed 

that any business that did not participate, pass the screening questions, and 

know the answers did not infringe; and 

b. the damages expert chose a reasonable third-party benchmark to 

estimate value (because Microsoft gave away the inventive technology to 

entice customers to buy a new version of Word)? 

5. Did the district court properly enhance damages where: 

a. the jury, which was properly instructed in accordance with 

post-Seagate case law, found that Microsoft willfully infringed the 449 

patent; and 

b. Microsoft repeatedly violated the court s order to refrain from 

improper arguments? 

6. Did the district court properly grant an injunction requiring Microsoft 

to remove the infringing functionality from its products, where: 

a. i4i began selling its patented products before Microsofts 

infringement; and 

b. Microsoft s infringement destroyed i4i s ability to compete in 

the market for its patented products? 

3

II. STATEMENT OF THE CASE 

A. Preliminary Statement 

Microsoft repeatedly attacks the district court s performance as a 

gatekeeper. But Judge Davis has a substantial track-record in patent cases, and 

Microsoft s criticism of him as unable (or unwilling) to fulfill his duties is nothing 

less than an unfair attempt to divert attention from what really happened. When it 

suited its purposes, Microsoft touted i4i as a Microsoft Partner able to provide 

software that Microsoft could not. But behind i4i s back, Microsoft usurped i4i s 

invention, destroying i4i s ability to compete in the market that it had created. 

Consider Microsoft s argument that the court accorded a critical claim term 

no meaning whatsoever, effectively erasing it from the patent. MSBr.1. What 

Microsoft is alluding to is the word distinct, which appears in a number of claim 

phrases, including metacode map distinct storage means and mapped content 

distinct storage means. The court did not separately construe the word distinct, 

but did construe both phrases, including the word. Indeed, it is Microsoft that is 

attempting to ignore the law in arguing that the invention s notion of distinctness 

meant that the claims should be construed to include two additional limitations 

independent manipulation and two separate files neither of which finds any 

support in either the claim language or the specification. Further, adopting 

Microsoft s proposed constructions would have meant that the patent covered none 

4

of the embodiments of the invention that automatically update one part of a 

document based on edits to another part. 

Or consider Microsoft s assertion that the court failed to act as a gatekeeper 

in connection with Microsoft s validity defenses. MSBr.2. Microsoft s complaint 

is that the court rejected its argument that the jury could not properly accept the 

inventor s testimony regarding the on-sale bar because it lacked corroboration. 

But the court correctly rejected Microsoft s argument. Unlike in priority disputes, 

where requiring corroboration of an inventor s testimony makes sense, there is no 

reason to require corroboration in all instances, and this Court has never required 

it. Moreover, the point in dispute was whether a prior i4i product incorporated the 

claimed invention, and that was corroborated in multiple ways. 

While Microsoft also criticizes the court, at length, for its treatment of 

damages issues (MSBr.2-5), its attacks are misguided. For example, in criticizing 

the survey testimony that formed the basis of i4i s damages claims, Microsoft 

demands a level of perfection that this Court has never required and few surveys 

would ever meet. i4i s survey was designed, conducted, and analyzed using 

accepted methodology, and its admissibility was beyond legitimate question. 

Similarly, the Georgia-Pacific analysis undertaken by i4i s expert, including his 

testimony regarding the 25% rule, followed this Court s law to the letter. In 

5

short, i4i s damages evidence was proper and well within the guidance of this 

Court s case law. 

While Microsoft further criticizes the court for its decision to enhance 

damages (MSBr.4), the court s discussion of the issue shows a careful balancing of 

the relevant facts (it did not, after all, award the maximum enhancement, or 

anything close to it), and its decision was amply warranted. The court properly 

rejected Microsoft s arguments that a reasonable person would have considered its 

defenses sufficient to avoid infringement (A21-22), and it found that the 

uncontradicted evidence showed that Microsoft had knowledge of the [ 449] 

patent and its relation to i4i s products and willfully chose to render the technology 

obsolete while simply ignoring the patent (A45). Further, the court relied on 

Microsoft s litigation misconduct as an additional factor favoring enhancement, 

noting that Microsoft s counsel repeatedly made arguments to the jury that were 

in direct violation of the Court s instructions. A46-47. 

Microsoft s brief reflects numerous other instances where it tells only part of 

the story. Microsoft ignores, for example, that the district court found that 

Microsoft waived its contention that software cannot form the basis of a sale under 

section 271(c) (A17) and also that it never preserved its ability to challenge many 

of the jury s factual findings by moving for JMOL at the close of evidence (A25). 

Moreover, in arguing that i4i s survey respondents were inadequately screened 

6

(MSBr.56), Microsoft relies on inaccurate and cropped quotes from the screening 

questions. Most egregiously, though, Microsoft repeatedly distorts this Court s 

case law. 

In arguing that it did not have the intent required for indirect infringement, 

for example, Microsoft cites Voda v. Cordis Corp, 536 F.3d 1311 (Fed. Cir. 2008), 

as holding that despite its knowledge of i4i s patent (and its contents), it had no 

duty to investigate. MSBr.54. But Voda was a willfulness case (536 F.3d at 1327- 

29), and in Broadcom Corp. v. Qualcomm, Inc., 543 F.3d 683, 699 (Fed. Cir. 

2008), this Court expressly refused to apply willfulness law in the inducement 

context (id. at 699) and upheld the jury s inducement verdict based on evidence of 

the same type provided here a failure to investigate, a failure to explore design 

around approaches, a failure to take remedial steps and, of course, a failure to 

seek legal advice (id. at 700). Similarly, in contesting the court s enhancement 

decision, Microsoft asserts that [t]his court has been absolutely clear that 

attorney . . . misconduct during litigation is not sufficient for an increased 

damages award under section 284. MSBr.73. But what this Court has actually 

held is not only that acts of litigation misconduct are not by themselves a 

sufficient basis for enhancing damages, Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570 

(Fed. Cir. 1996), but that such acts may be used as a factor in determining 

7

whether or how much to increase a damages award once sufficient culpability is 

found (id. at 1571). 

In sum, in conducting the trial of this case, the district court did an 

exceptional job following this Court s case law. The jury weighed the facts, 

including the credibility of the witnesses, and found overwhelmingly in i4i s favor. 

And the court agreed, crafting an extremely thorough, 65-page opinion in which it 

decided to sustain the jury s verdict, enhance the damages award, and enter an 

injunction. Judgment for i4i should be affirmed. 

B. The Parties and Their Products 

i4i Inc. sells add-on software that expands Microsoft Word s capability of 

working with documents containing special codes, known as XML. As described 

below, XML encodes information into documents that identifies what kind of 

information the documents contain. 

Word, the dominant word processing software, could not always work with 

XML documents. In fact, when the U.S. government requested that functionality 

in 2001, Microsoft turned to i4i for help and the two companies worked together to 

provide a solution. The partnership ended, however, when Microsoft incorporated 

into Word (then the 2003 version) the capability that i4i had been providing (i.e., 

the ability to work with XML documents). Since then, i4i has struggled to 

maintain any position in the market. 

8

C. Course of Proceedings and Disposition Below 

On May 20, 2009, after a seven-day trial, the jury rendered a verdict in i4i s 

favor. A236-37. Following extensive briefing on post-verdict motions (including 

seven filed by Microsoft), the district court issued its order on August 11, 2009, 

denying all of Microsoft s motions. A5-6. Additionally, the court enhanced 

damages and issued an injunction requiring that Microsoft disable Word s 

infringing XML functionality, something Microsoft had done before to tailor its 

Word products to different markets. A51-57. The court denied Microsoft s 

motion to stay the injunction pending appeal (A60), but on September 3, 2009, this 

Court issued an order staying the injunction pending appeal. 

III. STATEMENT OF FACTS 

A. Electronic Document Markup 

Markup languages use tags intermixed with content to enhance the 

information in documents processed by a computer. A249(2:25-54). While tags 

can be added to a document for formatting purposes (A249(2:25-31)), they can 

also describe the meaning of a segment of text or the structure of a document 

(A249(2:41-54)). For example, formatting tags might designate certain text for 

display in boldface, while descriptive (content-based) tags might identify text as a 

phone number. 

A tag generally includes a delimiter (one or more characters that set the tag 

apart from the content) and its name. A1310. For example, a document containing 

9

202-555-0100 could be augmented to 202-555- 

0100 , where < and > are delimiters and the name 

phone_number describes the content. Markup languages include SGML and 

XML, a subset of SGML. A7704-06. 

B. i4i s Early Efforts with Electronic Document Processing 

Michel Vulpe formed a software consulting company in 1989, which later 

became Infrastructures for Information ( i4i Inc. ). A1628. One of Vulpe s early 

clients was SEMI, a standards organization. A1628-29. SEMI asked Vulpe to 

create a database and distribution system for its documents using SGML, and also 

to create software for SEMI s Macintosh-based computers so SEMI could edit 

SGML documents. A1629. Vulpe hired a computer consultant, Stephen Owens, 

to help him. A761;A1629-30. In early 1993, they delivered a product called S 4 to 

SEMI. A1630-32. 

SEMI-S 4 allowed a user to add SGML tags to a document. A765. It also 

allowed the document to be divided into chunks, or entities portions of an 

SGML-encoded document containing tags intermixed with content which could 

then be stored. A825-26;A832-33;A1981-82(74:16-75:10). 

Vulpe and Owens received mixed feedback regarding SEMI-S 4 . Of 

particular concern were comments criticizing the way users had to interact with the 

document s metacodes and content at the same time. A761-62(81:9-82:13);A789- 

10

91(109:14-111:9). Then, around November 1993, in what Vulpe described as a 

eureka moment, Vulpe and Owens conceived of the invention at the heart of this 

case and started working to develop a software implementation. A1632-33;A1638- 

39;A791-92. Vulpe faxed a brief description of the invention to a patent attorney 

in February 1994 showing the essential characteristics of what he and Owens had 

conceived. A7788-91;A1633-34. The invention manages markup by creating a 

map of the various elements of markup and where each is placed in the content. 

A7788-91 This map may be edited separately from the document s content, an 

approach that differed significantly from the approach used in SEMI-S 4 (and other 

SGML editors), which could not edit a document s metacodes separately from 

content, making the document difficult to work with. A761-62(81:9-82:13);A821- 

26;A1750-51. 

Owens prepared a draft patent application in April 1994, which was revised 

and filed in June 1994. A7775-87;A1639-40;A795-96;A239. Simultaneously, 

Owens wrote software to implement the invention and developed a working 

prototype. A1647-48;A792-93;A7239. Unlike SEMI-S 4 , Owens wrote the source 

code for IBM PCs rather than Macintosh computers because he was more familiar 

with PC software, including PC software for processing SGML tags. A794. 

Reporting to the i4i Board of Directors in June 1994, shortly after the 

invention s conception (and approximately a year after delivering SEMI-S 4 ), Vulpe 

11

explained that he was proceeding with two separate projects: one productizing 

SEMI-S 4 so it could be sold to customers other than SEMI (A1640-42;A7797) and 

the other implementing the subject of the patent application (A1642-43;A7797). 

Vulpe explained, however, that Infrastructures does not plan to aggressively 

market or promote the patent technology at this point. It is fundamental to 

Infrastructures competitive advantage and is an advantage that must be closely 

guarded. A7797. 

Eventually, after changing the S 4 product to run on PCs rather than 

Macintosh, Vulpe and Owens merged the two projects by adding the patented idea 

to what had been the S 4 product. A1648-49. After limited success, i4i focused on 

just the patented functionality, as the SGML Application Server, which served as 

the base of an implementation for Word S4/Text or Tagless Editor and sells the 

current implementation as x4o. A1652-54. Because i4i had moved away from 

Macintosh, Owens never went back to add the functionality of the new invention to 

SEMI-S 4 . A794-95. Ultimately, i4i finished its work with SEMI and discarded the 

SEMI-S 4 Macintosh-based source code altogether. A1632. 

In August 1994, Vulpe applied for funding from Canada s Industrial 

Research Assistance Program ( IRAP ) (A1688-89) and summarized Owens s 

modifications of S 4 to incorporate the invention. A1753-56;A3759(initial 

12

implementation of the pending patent application had been embedded into 

Infrastructures S 4 product );A3770. 

C. The 449 Patent 

1. The 449 Patent s Specification 

The 449 patent concerns content-based markup that identified the 

content s meaning (as opposed to formatting markup, which controls its 

appearance, see supra at 9). The patent refers to content-based markup as 

metacodes. A250(4:14-17). 

The 449 patent addresses two basic problems associated with using 

metacodes inflexibility and inefficiency. Inflexibility arose because existing 

applications intermixed metacodes with the content and therefore could only edit 

them concurrently with the content. A250(3:21-34). Moreover, intermixed 

metacodes made it difficult to create multiple versions of a document with the 

same content used in different ways (using different metacodes). Id. Inefficiency 

arose because existing document-editing programs had to process metacodes and 

content together. A250(3:35-60). 

a. The Invention s Creation of Distinct 

Metacode Maps and Mapped Content 

The 449 patent describes a novel solution to these problems by separating 

the structure of a document the metacodes from its content. A250(4:3- 

10);A779. A metacode map stores metacodes and the locations within the 

13

document s content that the metacodes affect (called addresses of use ). 

A250(4:5-10,4:17-20,4:29-30);A253(10:3-10). The document s content is kept as 

mapped content, which the addresses of use identify a location within, thus 

correlating the document s metacodes with its content. A250(4:5-10,19-20). The 

patent shows an example of a metacode map, which lists the position for three 

regions of markup applied to a document, each with a start and stop position: 

A253(10:1-10). 

The invention s key is to treat the metacodes and content distinctly, such that 

each may be treated as a separate entity. A2796;A2812. This allows users to 

apply different metacode maps to a document s content, essentially repackaging 

the content to create multiple documents. See A768. For example, the invention 

allows the same content to be used for entirely different purposes, such as in a 

technical paper for trade meetings or a product manual for customers. A251(6:26- 

43). 

The invention can treat content and metacodes as distinct entities because it 

stores the two as distinct entities. A250(4:3-13) ( [T]he metacodes of the 

14

document are separated from the content and held in distinct storage in a structure 

called a metacode map, whereas document content is held in a mapped content 

area. ). This does not mean, however, that the two must be stored in separate files. 

To the contrary, the patent never discusses any need or even advantage to storing 

the metacode map and content in separate files. Indeed, the Summary of the 

Invention broadly defines the documents that can processed with the invention and 

states that a document can be processed irrespective of its mode of storage. 

A250(4:57-59). 

b. The Invention Performs Automatic Updating of 

Metacode Maps After Changes to the Content 

Although stored as distinct entities, the content and metacode map must 

interact. After a user changes the document s content, the system updates the 

metacode map(s) corresponding to the content to synchronize the two parts. A255- 

56(14:49-15:5) (describing how Figure 9 s processing system . . . reads the 

changes to the mapped content . . . and uses the changes to update . . . the 

metacode maps ); see also A256, claim 10 (claiming a means for amending a 

plurality of maps in consequence of an amendment to mapped content. ). 

c. The Invention Allows, But Does Not Require, 

Restriction of a User s Access to One Portion of 

a Document 

While still allowing automatic updating as described above, there may be 

some situations where a document s owner wants a particular user to be able to 

15

modify a document s metacodes but not its content. The invention is flexible 

enough to provide that capability: 

A252(7:6-16). 

The present invention provides the ability to work solely 

on metacodes. . . . This allows changes to be made to the 

appearance or structure of a document by individuals 

who may not be allowed to modify the content. 

2. The 449 Patent s Prosecution 

The 449 patent s prosecution spanned several years. A239. Microsoft, 

however, cites only two events as relevant to the issues on appeal: the PTO s 

rejections of the claims over Mizuta and Kugimiya. MSBr.26-27. 

The PTO rejected all the claims over Mizuta, which allegedly anticipated 

claim 20 and rendered claims 1-19 obvious. A2802-04. In response, i4i pointed 

out that Mizuta neither teaches nor suggests certain important claim features. 

A2813-16. Specifically, Mizuta describes meta-information (information about 

the document itself, e.g., who authored it and when), not metacodes (information 

that identifies how content is to be interpreted). A2813-14. Accordingly, argued 

i4i, Mizuta does not show the presently claimed map of metacodes stored in 

distinct metacode storage means of claim 20. Id. Similarly, regarding claims 1- 

19, i4i observed that Mizuta s meta-information is different from the invention s 

metacodes. A2815-16. To prove that Mizuta did not disclose a metacode map, i4i 

cataloged the contents of Mizuta s document file : a document file (15A) 

16

includes a matter part (41A), a form part (42A) and an arrangement fashion storage 

area (17A). A2816 (citing A7821(MizutaFig.1B)). i4i then stated that this is an 

exhaustive list of the document information Mizuta disclosed because in Mizuta 

all document information is stored in one file the document file. Id. (emphasis 

added). Thus, concluded i4i, Mizuta lacks any notion of a metacode map, let 

alone such a map in a metacode map distinct storage means, as presently taught 

and claimed. Id. (emphasis added). 

Although i4i stated that Mizuta s document information is stored in one 

file, i4i did not distinguish Mizuta on that basis. Indeed, just a few sentences 

later, i4i confirmed that as far as i4i s invention was concerned, the way the 

document was stored had no significance. Id. ( [I]n the present invention, as noted 

above, a document broadly refers to a non-random aggregation of data 

irrespective of its mode of storage or presentation. (emphasis added)(quoting 

A251(6:57-59)). 

The PTO also rejected the claims over Kugimiya. A2828. Kugimiya 

teaches a system for translating documents from one language to another (e.g., 

English to Japanese). As part of the translation process, Kugimiya removes the 

markup, stores it as a separate file, translates the content of the document, then 

replaces the markup in the translated document so it is structured the same way as 

the original. A3721;A3726(2:52-63). After replacing the markup, the file that was 

17

created is discarded. A2841-42. Moreover, nowhere in the Kugimiya translation 

process is the markup file provided to the user for editing. Id. Accordingly, 

explained i4i, Kugimiya fails to teach providing the document as the content of 

the document and the metacode map of the document. A2842. The PTO initially 

disagreed. A2846-47. In an interview, however, i4i explained how Kugimiya 

failed to teach the providing limitations of the claims. Moreover, i4i showed that 

Kugimiya also lacked persistent storage for the metacode map, since Kugimiya 

only temporarily stores the metacodes as a separate entity during the translation 

process and then intermixes them with the content. A2853. In the invention, 

however, the metacodes are separate from the content and managed separately 

from the content. A2854. Ultimately, the examiner agreed that Kugimiya does 

not teach the providing limitations and allowed the claims. A2849;A2855. 

3. The Asserted Claims 

At trial, i4i asserted claims 14, 18, and 20. The issues on appeal relate to 

independent claims 14 and 20, each of which contains limitations directed to the 

metacode map, the mapped content, addresses of use, and distinct storage for the 

metacode map and mapped storage (the contested limitations are italicized): 

14. A method for producing a first map of metacodes 

and their addresses of use in association with mapped 

content and stored in distinct map storage means, the 

method comprising: 

18

A256. 

providing the mapped content to mapped content storage 

means; 

providing a menu of metacodes; and 

compiling a map of the metacodes in the distinct storage 

means, by locating, detecting and addressing the 

metacodes; and 

providing the document as the content of the document 

and the metacode map of the document. 

20. A method for producing from a document made up 

of metacodes and content, a map of metacodes and their 

addresses of use in association with mapped content of 

the document and stored in distinct map storage means, 

the method comprising: 

(a) reading the content of the document until a metacode 

is found; 

(b) copying the content and storing the copied content in 

a mapped content storage; 

(c) noting in the map the found metacode and its position 

in the content; 

(d) repeating the processing of (a)-(c) until the entire 

document has been processed; and then 

(e) providing the document as the content of the 

document separately from the metacode map of the 

document. 

D. Microsoft Recognizes the Commercial Significance of i4i s 

Invention 

In March 1999, i4i released S4/Text, a software product based on the 449 

patent s teachings. See A884. S4/Text provided an important extension to Word 

19

that Microsoft could not itself provide. Indeed, Microsoft had tried to provide a 

custom XML editor, recognizing that it was absolutely critical to build a generic 

XML edit[or] for custom XML. A7588;A7291( If we re betting the farm on the 

XML revolution, an XML editor should be an absolutely fundamental component 

of our product arsenal. );A7353-58;A7708-11. As Bill Gates put it, Now the 

market wants a great XML editor. . . . It s hard to say we are the leader of the 

XML revolution if we don t have an editor. A7592. Microsoft Press s director of 

development wrote to Gates in March 2001: An XML authoring tool would be a 

logical new product for Microsoft. If Word was to morph in an XML direction, 

that would refresh that product and provide one more reason for users to upgrade. 

A7291. 

Microsoft, however, struggled with the problems i4i had solved, recognizing 

that its failure to support custom XML was a problem we [have] always had with 

Word since years and years and Word failed to deliver on this vision. A7589. 

Indeed, one Microsoft executive noted that, I don t think we have any ideas how 

to do this for Word. A7591. As Microsoft s senior director of XML architecture 

put it in January 2000: Please do not be fooled by what we at Microsoft are 

building today: there is absolutely no client in Microsoft which can consume, 

manipulate, modify, author, [and] present the data in a user friendly way to the user 

and let her take advantage of generic XML schemas. A7557;A7555-63. 

20

But Microsoft was aware that i4i already provided the desired functionality. 

In fact, Mark Belk, from Microsoft s U.S. Government sales office, asked i4i in 

April 2001 to come to DC to meet with Microsoft. A941-47;A974;A1928- 

29;A7373. An internal notice sent before the meetings described i4i as a 

Microsoft Partner and described i4i s patented product as the simplest way to 

enable your entire workforce non-technical as well as technical to create XML 

collaborative content without a costly investment in proprietary software and 

training. A7373. 

During the meetings, i4i provided sales kits that contained an i4i at-a- 

glance datasheet identifying the 449 patent and describing i4i s business and 

product. A942-43;A7240. An i4i representative, Keith Thomas, discussed the 

architecture of i4i s product, explaining how it separated markup from the content 

of a document and enabled Word to act as an XML editor, and provided a 

demonstration. A998-1002;A1044-45;A7257. Thus, Microsoft learned about i4i s 

product and the 449 patent. A43-45;A946-47;A7359-64. 

Microsoft s Belk contacted i4i because several federal defense and security 

agencies were looking to Microsoft for a custom XML solution. A7242;A944-45. 

That Microsoft needed i4i to provide the government the XML functionality it 

sought was confirmed when Microsoft invited i4i representatives to a meeting with 

members of the intelligence community and Microsoft s XML for Word team 

21

Chris Pratley, Martin Sawicki, Brian Jones, and Andy Zukerberg. A1000(134:17- 

23), A1005(139:9-18);A7279-88. At that meeting, Pratley said that Microsoft did 

not have any plans to offer the custom XML editing that the government wanted, 

but instead promoted i4i s ability to provide specialized solutions. A7279- 

88;A1005-06(139:21-140:8). 

Microsoft s Belk also praised i4i for having a capability that [Microsoft] 

only ha[s] on the drawing board (A7593) and demonstrated the S4/Text Tagless 

Editor working with Word XP to defense-community representatives in both June 

and August 2001. His presentation highlighted i4i s S4/Text as being the heart of 

Evolving Office to handle Intelligence Processing (A7571) and the Microsoft 

proposed solution (A7586). Later, Belk again lauded i4i, noting that the only way 

Microsoft could have succeeded with the government was with a third party plug 

in and I4I came through for us. A7368. And that fall, a Microsoft program 

manager recommended i4i as the only source for customers who needed custom- 

XML authoring capabilities in Office XP: The only company I can think of right 

now is i4i. A7546. 

E. Microsoft Decides to Create Its Own XML Editor and 

Render i4i s Obsolete 

Microsoft had received demands from customers for the ability to author 

custom XML in Word (A1103-04) and believed that Word gave it a great 

advantage in the custom-XML authoring market, making it difficult for third-party 

22

XML authoring providers to compete (A7295; see A7291). Accordingly, at the 

same time Microsoft was praising the improved functionality that i4i s product 

brought to Word, and touting i4i as a Microsoft Partner, Microsoft was working 

behind i4i s back to make i4i s product obsolete. Just five days after i4i s initial 

meeting with the XML for Word team, for example, Microsoft executives 

discussed plans for Word and how it would affect the custom-XML authoring 

market, noting that it would eventually make obsolete any competitive attempts 

by third parties to conquer that market. A7295. 

In a June 2001 e-mail, when Belk suggested adding i4i s Thomas to the 

Office/XML Advisory Council (A7368;A7371), Zukerberg made Microsoft s 

position clear internally: [I]f we do the work properly, there won t be a need for 

[i4i s] product. A7367;A44. Although Belk responded that he would like to 

inform i4i of that possibility (A7367), that never happened. Instead, Zukerberg 

told Thomas that membership on the Advisory Council was full. A7374. 

Later in 2001, before Word 2003 was released, Microsoft cut off all contact 

with i4i. A1019. In one of several efforts by i4i to reestablish the relationship, i4i 

sent Microsoft an e-mail in January 2003 reminding Microsoft of the 449 patent 

and i4i s patented product. A44;A7302-03. The e-mail was forwarded to Sawicki 

and Jones, who had previously met with i4i. In an internal e-mail, Sawicki noted 

Microsoft s high regard for i4i s patented editor, but explained Microsoft s plans to 

23

make it obsolete: [W]e saw that tool some time ago and met its creators. Word 11 

will make it obsolete. It looks great for XP though. A7302-03;A1200-02. Again, 

no one told i4i. 

F. Microsoft Destroys the Market for i4i s Product 

i4i s custom-XML products, including S4/Text, x4o, and A4L, practice the 

claimed invention. A1653-56;A987;A992-93;A995-96;A2314-18;A7747;A7753- 

55;A7633-7635. x4o is S4/Text s successor (A1674), while A4L is an 

implementation of x4o customized for the pharmaceutical industry 

(A7100;A7747). 

Since Microsoft incorporated the accused custom-XML functionality (which 

allows users to define their own metacodes and Microsoft refers to as customer- 

defined schemas (see A7566)), Microsoft has sold over 100 million copies of 

Word 2003 and Word 2007. Further, Microsoft touted XML as a core technology 

to Word 2003 and 2007 (A7684) and stated both that support for custom-XML 

constituted 90% of the value to using XML (A7553) and that custom-XML was 

the most important effort [it] did on XML in Office since ever (A7565). As 

Microsoft predicted, including custom-XML functionality in Word rendered i4i s 

products obsolete in 80% of the market. A1476. 

i4i now operates almost entirely in the specialized niche market of the 

pharmaceutical industry. A889-90. Thus, when i4i s Thomas was asked, he 

24

agreed that Microsoft and i4i do not directly compete in the pharmaceutical 

space. A1027-28. Even so, now that Microsoft provides custom-XML, both 

Johnson & Johnson and Pfizer told Vulpe that they would use Word (A1676- 

77;A7764-66) and other potential customers are unwilling to purchase i4i s 

custom-XML product (A1764-67;A7091;A7099), showing that Microsoft and i4i 

directly compete in the custom-XML market (A1677;A1399-401;A891). 1 

G. i4i Sues Microsoft for Infringement 

After Microsoft released Word 2003 the first version with custom-XML 

functionality i4i investigated possible infringement. Once i4i determined that 

Microsoft might be infringing, it sought the funding needed to bring suit. A2140- 

42;A891;A1399-401;A1476;A7304; A7367;A7302-03. i4i obtained the assistance 

of Northwater Intellectual Property Fund L.P., and formed a limited partnership 

(i4i LP) owning the patent to bring suit. i4i LP sued Microsoft for infringement in 

March 2007, and subsequently granted i4i Inc. an exclusive license and joined it as 

a plaintiff. 

1. Claim Construction 

Among the parties many disputes regarding claim construction was whether 

metacode map distinct storage requires a separate file for the metacode map. 

1 While i4i s losses in 2003 and 2004 were lower than in some previous years, that 

resulted from i4i reducing its operating expenses investing in research and 

development has been expensive for i4i throughout its history (A2340;A874-75) 

not from any increase in revenue (A7231-32,7237;A7199;A882-83;A931-32). 

25

A99. Microsoft contended (as it does here) that the specification and prosecution 

required the claimed metacode map and mapped content to be stored in separate 

files. Id. In particular, Microsoft pointed to the patent s repeated references to 

storing the metacode separately and distinctly from the mapped content. 

A3861. Microsoft also pointed to i4i s observation during prosecution that in 

Mizuta all document information is stored in one file. A3862; see supra at 17. 

The court rejected Microsoft s attempts to limit the claims. In particular, the 

court noted that while the patent repeatedly stresses that the metacode map and 

mapped content should be stored separately, it nowhere suggests that this had to be 

done in separate files. A99. Regarding i4i s prosecution statements concerning 

Mizuta, the court concluded that they do not rise to the unmistakable and 

unambiguous evidence of disclaimer this Court requires. A100. Instead, the 

court concluded that the intrinsic evidence requires the claimed computer system 

or method to differentiate between the stored metacode map and mapped content, 

and it continued that, [w]hether the computer system or method requires the 

metacode map and mapped content to be stored in separate files depends on a 

computer s operating system and how a program interfaces with the operating 

system to access and store data. A101. Thus, the court construed the term 

distinct map storage means as a portion of memory for storing a metacode 

map. Id. 

26

In discussing the separate files issue, the court observed (in connection 

with the embodiment of the invention that allowed a user to edit the metacodes 

without being able to edit the content (see supra at 15)) that the claimed invention 

provides the ability to change the structure of a document independently from the 

document s content and allows individuals to modify a document s structure when 

they may not be allowed to modify the document s content. A99. More than a 

year later, on the eve of trial, Microsoft used this isolated statement to argue that 

the claims required what Microsoft now called independent manipulation of the 

metacode map and mapped content. A70-71. But the court disagreed, concluding 

that the patent s description of this capability (and the court s discussion of it) 

was clearly permissive and [did] not imply a claim limitation. A71. Further, the 

court chastised Microsoft for not reading the court s claim-construction order as a 

whole and taking a single statement out of context. Id. 

2. Trial 

a. Infringement 

At trial, i4i presented detailed evidence showing that the custom-XML 

feature in Microsoft Word 2003 and 2007 ( Word ) meets the limitations of claims 

14, 18, and 20 of the 449 patent. One of i4i s experts, Dr. David Martin, 

discussed how he reviewed the source code for the custom-XML feature in Word 

and prepared figures summarizing the data structures used by the feature. A1353- 

27

55;A7756-57. As Martin explained, Word creates data structures to store 

information about XML elements in a document. A1358-63;A1365-69. 

Another i4i expert, Dr. V. Thomas Rhyne, compared Word s data structures 

and functionality (as Martin had explained them) to the asserted claims. A1105- 

68;A7238. In particular, Rhyne explained why Word s data structures meet the 

metacode map limitation: a data structure that contains a plurality of metacodes 

and their addresses of use corresponding to mapped content. A1161-70. Rhyne 

also explained how Microsoft stored this metacode map in a distinct map storage 

means and, particularly, how the metacode map is stored in a separate part of 

memory from the mapped content. A1132-34;A1146-48;A1179-80. 

Rhyne also addressed contributory infringement, where he focused on the 

custom-XML functionality because he believed that by providing Word 2003 both 

with and without the infringing functionality, Microsoft showed that it was 

separable from the rest of Word. A1211. Rhyne discussed Microsoft s three 

asserted substantial noninfringing uses for custom-XML in Word: (1) working 

with XML documents with metacodes but no content; (2) creating XML 

documents that are never reopened; and (3) working with XML documents saved 

in Word s proprietary binary format ( .doc or .dot files) that cannot be shared 

with other systems. A1213-16. Regarding use without content, Rhyne explained 

that the only purpose of that would be to later add content, thus infringing at the 

28

later time. A1324-25. He also testified that creating documents but never 

reopening them had no relevance to how people actually use computer documents. 

A1217. Finally, he explained that the binary file format contravenes XML s 

fundamental purpose sharing documents across systems and that Microsoft 

showed agreement by switching to the infringing .docx format as the default in 

later versions of Word. A1213-17;A1324;A7726;A7704-06. Thus, Rhyne 

concluded that custom-XML in Word did not have any substantial noninfringing 

uses. A1218. 

i4i also alleged that Microsoft induced others to infringe. Specifically, 

Rhyne discussed the evidence showing that Microsoft knew about the patent 

(A7302-03; see supra at 21) and provided support showing customers how to use 

custom-XML in an infringing manner (A7704-06;A7930) and therefore intended to 

cause the acts of infringement. A1199-1206. Next, Rhyne showed actual 

instances of infringing use (A7931-32), a Microsoft training document that 

reported examples of customer use (A7941-49), and a stipulation that custom- 

XML has been used within an XML document. A1206-09. Rhyne explained that 

Microsoft knew or should have known that its instructions would result in others 

infringing because simply reading the patent which anyone in Microsoft s 

position should have done would have shown that using Word infringes. A1209- 

10. 

29

. Invalidity 

Microsoft also challenged the 449 patent s validity, relying on, inter alia, 

(1) i4i s SEMI-S 4 product, (2) a system known as Rita, and (3) a patent to DeRose. 

A2475. Microsoft argued that SEMI-S 4 (see supra at 10) practiced all the elements 

of the 449 patent. In response to Vulpe s and Owens s testimony concerning the 

fundamental difference between SEMI-S 4 and the invention that the invention 

maintained content distinct from metacodes and that they conceived of the 

invention in the 449 patent after installing SEMI-S 4 , Microsoft accused both men 

of lying. See A2459;A2481. Microsoft was unable, however, to back up its 

allegations. It was undisputed, for example, that nobody could know how the 

system stored a document s markup and content without access to the source code 

(which had been discarded years ago, see supra at 12). A2299-302;A1958-59. 

Instead, Microsoft attempted to rely on the SEMI-S 4 user s manual, the testimony 

of a sales employee with no technical understanding of the system, and Vulpe s 

description of the invention to IRAP (see supra at 12). MSBr.40-42. Rhyne 

considered all this evidence and explained to the jury how it was consistent with 

Vulpe s and Owens s testimony concerning the differences between SEMI-S 4 and 

the invention. A2299-306. 

Microsoft s expert, Stephen Gray, then discussed anticipation based on a 

collection of materials concerning Rita, a SGML tag-editing program. Rita was 

30

described in several academic papers (A2890-915;A3044-266) and embodied in 

commercial software. A2890-915;A2927-3043;A3044-266;A3227-412; MSBr.35. 

Microsoft asserted the on-sale bar based on a single sale of the Rita software in the 

U.S. prior to the critical date (A3414), notwithstanding that the source code Gray 

analyzed had been changed after that sale, making it impossible to know the 

characteristics of what was sold. A2294(46:6-16);A7601-32. One of the authors 

of the Rita papers, Dr. Donald Cowan, testified during his deposition that he 

neither wrote the Rita source code nor recalled what changes were made after the 

1989 sale. A2126-27(36:6-37:-6). Cowan thought the changes were made 

primarily to fix bugs and improve performance but admitted he was unsure. 

A2135-36(45:20-46:7). Nevertheless, Gray relied on the source code for support 

(A2056(149:17-19);A2058(151:4-7);A2060(153:12-15)) and tried to buttress his 

conclusions regarding Rita by becoming unspecific and referring collectively to the 

Rita papers and software (see, e.g., A2051(144:6-7,22)) (the court later described 

Gray s testimony as based on an amalgam of the Rita source code and the papers 

written about the Rita program, A30). But the asserted claims require certain 

details regarding how data from a document is decomposed and maintained in 

memory, and Rhyne testified that the Rita references did not include enough detail 

to invalidate the claims. A2294-95. 

31

Gray also analyzed DeRose. Rather than creating a metacode map with 

addresses of use associated with mapped content, both Rita and DeRose stored the 

tag names and content intermixed in what is called a tree structure (A2283- 

84;A2899;A2289-91;A3438;A3439): 

A3438. The SGML standard documents mentioned in the 449 patents 

Background also discuss storing a document in a tree structure. A249(2:41- 

43);A2285;A5432. Rhyne testified that because a tree structure intermixes 

metacodes and content, it fails to meet the metacode map and mapped content 

limitations, and using pointers within a tree structure meant it also lacked an 

address of use. A2286-88;A2291-92. Microsoft s contention that Rhyne 

acknowledged that trees . . . separate metacodes from the content (MSBr.36) 

misconstrues his testimony. Rhyne explained that each piece of content is separate 

32

from the other pieces of content not from the metacodes. A2286(38:7- 

18);A3438. That is consistent with Figure 5 from DeRose and distinctly different 

from the 449 patent. Id. 

Finally, Gray presented his theories of obviousness to the jury, stating that 

any element missing from a particular reference could be found in another 

reference. A2081. For his analysis, Gray considered Rita and DeRose, each in 

combination with Kugimiya (discussed supra at 17). A2082-83;A2084-86. 

Notably, he did not present any other theories of obviousness. 

Countering this, Rhyne explained why a person skilled in the art at the time 

would not have found any reason to combine Kugimiya with Rita or DeRose. 

A2308-09. Specifically, because Kugimiya addressed a different problem in a 

different field (language translation) and, in fact, destroyed its temporary data 

structure after translation was complete, Rhyne concluded that a person of ordinary 

skill in the art would have no reason to make the combinations proposed by Gray 

and that none of the combinations would invalidate the claims of the 449 patent. 

A2308-09;A2039. 

Next, Rhyne presented a comprehensive list of secondary considerations that 

supported the nonobviousness of the invention claimed in the 449 patent, 

including commercial success (primarily pointing to Microsofts infringing 

product), failure of others to achieve the results of the patent, long-felt need, 

33

disbelief or skepticism, and industry praise. A2310-13; see also supra at 

19;A7596 (describing Microsoft s failure). 

c. Damages 

Dr. William Wecker, an expert in statistics and applied mathematics, 

testified for i4i regarding the amount of infringing use by businesses. A1533-618. 

Wecker testified that because he could not ask all business users of Word whether 

they had used the infringing technology, he conducted a survey designed to select a 

statistically valid sample of participants for extrapolation. A1541-43. As Wecker 

explained, such surveys are routinely used by the federal government and others to 

estimate the behavior of large populations. A1542. He testified that, in this case, 

the survey was designed, conducted, and analyzed using accepted methodology. 

A1543-65. 

Wecker explained that he worked with a well-known survey company to 

design and implement the survey. A1548-49. After asking screening questions to 

identify the IT or computer administrator whose job it was to know what software 

had been installed and used within the business (A1549-52;A1581-82;A7962-75), 

the survey asked forty substantive questions (A1564). Respondents could respond 

that they were knowledgeable about usage in only a portion of their entire 

organization, or answer any question with don t know. A1552;A1578- 

79;A1582-83. 

34

Wecker testified regarding the methodology used to select the 988 

businesses contacted for the survey. A1544-48. Of the 988 respondents, 46 

participated in the survey, and of those 46, 19 used the infringing technology. Id. 

But Wecker did not assume that 19 out of every 46 Word users (41.3%) infringed. 

Rather, he assumed that all 942 businesses that did not respond to the survey did 

not infringe, yielding an infringement rate of just 1.9%. A1562-63. Indeed, when 

a representative (1) could not be reached, (2) was reached but was unwilling to 

participate, (3) did not pass the screening questions, or (4) did not know the 

answers to the questions, Wecker imputed zero infringing use, thus assuming 

none of them infringed. A1563. Wecker testified that these assumptions were 

very conservative and that, in his opinion, the survey underestimated infringing 

use. A1563;A1566;A1419-20. 

While a few respondents gave a small number of inconsistent 

responses, Wecker testified that inconsistent results in surveys are common and he 

used a standard statistical practice known as logical imputation to correct 

the few inconsistencies. A1556-61;A8047;A8051-93;A8095-104. For example, 

respondent #168 provided a response of 4 when asked, How many different 

computers at your business ever had Microsoft Word 2007 as an installed 

application at any time during calendar year 2008? A1557. A response of 3 

was recorded for a subsequent question about what percentage of those computers 

35

used Word to open an XML document containing custom XML. A1557-58. 

Wecker interpreted this answer not as 3% (because there is no 3% of 4 computers), 

but as 3 of 4 computers, or 75%. A1559;A38. 

i4i also presented testimony from a damages expert, Michael Wagner. 

Wagner apportioned the invention s value by calculating a $98 royalty rate only on 

Word products that were actually used in an infringing manner by businesses. 

A1383-85. He explained that, in calculating this rate, he considered the Georgia- 

Pacific factors (A1381-82;A1386;A1397;A1407), selected a benchmark to 

apportion the value in the marketplace for an XML editor (A1386-91), and applied 

the well-accepted 25% rule i.e., that when an inventor allows someone else to 

use [his] invention, [he ll] keep 25 percent of the profits from the sale of that 

infringing product (A1386-87). 

Wagner explained that he chose XMetal as a conservative benchmark 

because (1) it was the cheapest of the three competing XML editors that Microsoft 

identified, (2) it was cheaper than the stand-alone SGML editor that Microsoft tried 

to sell several years earlier, and (3) Microsoft itself used XMetal prior to 

developing the infringing technology. A1387-90. He also testified about the need 

to use a benchmark in this case given Microsoft s business strategy of adding new 

features (like the infringing XML technology) to Word without raising the price in 

order to induce customers who already own Word to upgrade to the new version. 

36

A1392-94. Wagner also explained that if the $98 royalty rate was spread out 

evenly across all Microsoft Word products capable of infringing (rather than just 

the copies actually used to infringe), it would amount to only $2 per unit. A1396- 

97. Based on the Wecker survey results, however, Wagner concluded that 

approximately 1.85 million installations infringed the patent between November 

2003 and November 2008. A1410-13;A7977. Wagner calculated through 

extrapolation that an additional 262,282 installations infringed between 

November 2008 and the date of the trial, bringing the royalty base to 2.1 million. 

A1412-13;A7810. Wecker later testified that Wagner s extrapolation was 

reasonable. A1616-17. Wagner multiplied the $98 royalty rate by the 2.1 million 

infringing installations in the royalty base and deducted 3.5% to account for 

installations opening an XML file with a custom transform (which Microsoft 

contended did not infringe) to arrive at $200 million. A1418-19;A7808. 

While Microsoft offered testimony on the survey from Dr. Simonson (survey 

expert) and Dr. Ugone (damages expert), it did not ask Simonson to conduct his 

own survey to test the accuracy of Wecker s results. And Microsoft did not file a 

JMOL motion on damages. 

37

3. The Jury s Verdict 

The jury found that Microsoft willfully infringed all three asserted claims 

and awarded damages of $200,000,000. A236-37. It further found that none of the 

asserted claims of the 449 patent was invalid. Id. 

Microsoft raised a number of issues in its post-trial motions. Citing 

Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 452 (2007), Microsoft contended 

that a software manufacturer cannot be liable for contributory infringement 

because section 271(c) does not cover intangible software. A8029. Several of 

the court s holdings regarding waiver, including its ruling on this issue, are 

particularly relevant in this appeal. In particular, the court held that Microsoft had 

not argued, before the case went to the jury, that software could not form the basis 

of infringement under section 271(c). A17. Accordingly, the court held that 

Microsoft s JMOL on this issue is waived. Id. 

The district court denied all of Microsoft s post-trial motions. A5-42;A60- 

69. Regarding infringement, the court recognized that Microsoft s arguments 

concerning the distinct map storage means (and similar) limitations were based 

on the claim construction arguments the court had already rejected (see supra at 

25). A12. 

Regarding invalidity, the court held that Microsoft had sought JMOL of 

invalidity based only on SEMI-S 4 . A25. Concerning that product, the court noted 

38

that the inventors testified that the S4 system that was sold prior to the critical 

date never implemented the invention and that Rhyne s testimony showed that 

without SEMI-S 4 s source code, it could not be shown to practice the invention. 

A26-27. The court also observed that the testimony of Microsoft s expert (Gray) 

failed to approach the specificity or detail that was applied by the parties to the 

infringing WORD products or the other prior art. A27-28. Thus, concluded the 

court, there was legally sufficient evidence for the jury to find that S4 did not 

anticipate the 449 patent. A28. 

4. The District Court s Injunction and Award of 

Enhanced Damages 

As noted previously, the jury, which had been instructed based on In re 

Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), found that Microsoft s 

infringement was willful. A2382-84;A236. It follows, therefore, that the jury 

determined that Microsoft acted recklessly, a finding consistent with the weakness 

of Microsoft s defenses and the evidence concerning Microsoft s knowledge of 

i4i s patent, its product, and Microsoft s conduct in misleading i4i into thinking it 

was a Microsoft Partner. See supra at 21. 

When ruling on enhanced damages, the court considered the nine factors 

from Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), discussing the 

evidence showing that Microsoft knew of the patent but performed no investigation 

and acted despite knowing it would push i4i out of the market. A44-45. Against 

39

this, the court balanced the fact that i4i had not argued that Microsoft copied the 

patent and i4i had taken a long time to file suit against Microsoft. 

Finally, the court considered the conduct of Microsoft s trial counsel. A46- 

47. Notwithstanding that the court instructed counsel during voir dire not to argue 

that the assertion of patents by nonpracticing entities is improper (A625-27) and 

the parties agreement to refrain from such argument (A7001), counsel violated 

those instructions and tried to tap into public anger over the recent banking 

bailout by calling i4i bankers and suggesting they had no right to assert 

their patent against Microsoft. A722(42:6-8);A712(32:1-16);A2505-06(90:13- 

91:5). Considering all the factors, the court granted i4i s motion for appropriate 

enhancement, increasing the jury s award by twenty percent $40,000,000. A47- 

48. 

The court then turned to i4i s motion for a permanent injunction. After 

noting that i4i did not request that Microsoft disable the custom-XML functionality 

in the Word products that had already been sold, the Court considered the four 

factors set forth in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 394 (2006), 

including irreparable harm, sufficiency of monetary damages, balance of 

hardships, and public interest. A51-57. The Court cited, among other things, the 

two Microsoft documents that recogniz[ed] that the addition of custom XML into 

its WORD product would not only directly compete with i4i s products, but render 

40

them obsolete (A53), and concluded that i4i has overwhelmingly shown that it 

has been irreparably injured by Microsoft s continuing infringement of the 449 

patent and could not be compensated with monetary damages (A52-57). The 

court determined that the balance of hardships also favors i4i because the 

evidence clearly indicates that while custom XML is a small fraction of 

Microsoft s business [1 or 2%], it is central to i4i s. A55-56. Finally, the court 

noted that i4i had agreed that Microsoft could continue to support customers who 

had purchased infringing Word before the injunction and thus concluded that i4i s 

proposed injunction would have little effect, if any, on the public interest. A56-57. 

IV. SUMMARY OF ARGUMENT 

Microsoft s appeal labors to turn the jury s factual findings into legal issues, 

all the time ignoring that it waived several arguments. 

Microsoft s infringement appeal presents but a single issue of claim 

construction (obviously a legal issue) packaged in two different ways: its proposal 

that independent manipulation be read into the claims based on one possible use 

discussed in the specification; and its effort to require separate files, which are 

not even mentioned in the specification much less described as an essential feature 

of the invention. 

After preserving just one invalidity argument in its pre-verdict JMOL 

motion, Microsoft challenges a host of jury findings regarding validity. 

41

Specifically, at the close of evidence, Microsoft asked the court to grant JMOL of 

invalidity under the on-sale bar based on a sale of SEMI-S 4 that occurred before the 

claimed invention was even conceived. Microsoft did not seek invalidity based on 

obviousness in light of that product, and it did not mention any other prior art. 

After the jury rejected Microsoft s invalidity argument, however, Microsoft argued 

that the court should overturn the verdict based on other references. Although 

obviousness is ultimately a legal determination, Microsoft s waiver means that the 

factual underpinnings of the issue must be resolved in i4i s favor. And here, that 

leaves Microsoft with no legitimate basis to argue that the court reached an 

incorrect legal conclusion. Moreover, irrespective of Microsofts waiver, i4i 

presented substantial evidence to contradict each of Microsoft s positions, thus 

providing this Court with an additional reason to affirm the denial of JMOL on 

obviousness. 

Microsoft further challenges the jury instructions on contributory 

infringement and makes only weak objections to i4i s proof regarding Microsoft s 

intent. The court, however, instructed the jury consistently with this Court s case 

law, and any inconsistency with the statute amounts to nothing more than harmless 

error. Indeed, the lack of prejudice to Microsoft is clear given the court s holding 

that Microsoft did not timely argue that the sale of software cannot ever 

contributorily infringe and thus waived the issue. 

42

i4i presented voluminous documentary evidence and testimony regarding 

Microsoft s history of working with i4i as a Microsoft Partner, including internal 

e-mail discussing how Microsoft s development team had seen i4i s patented 

product and thought it looks great for then-existing versions of Word but later 

versions of Word would make it obsolete. Microsoft now tries to avoid this 

evidence by citing case law relevant to willfulness instead of indirect infringement, 

and arguing that despite its knowledge of the patent number and claimed 

functionality, as well as its dealings with i4i regarding the patented product, it had 

no duty to look into the patent. Microsoft s argument fails utterly. 

Microsoft s damages arguments should also be rejected. First, the survey 

criticized by Microsoft carries every indicia of reliability. It was designed, 

conducted, and analyzed using accepted methodology by an expert in statistics and 

applied mathematics and a well-known survey company. Contrary to Microsoft s 

complaints, the survey included proper screening questions to identify the person 

who knew what software had been installed and used by others in the business. 

Nor did the survey encourage guessing, as respondents could answer don t know 

to any question. Finally, that only 46 of 988 businesses responded was not 

problematic because Wecker conservatively assumed that all of the non- 

respondents did not infringe. 

43

Wagner s expert testimony on the reasonable royalty was also properly 

admitted. Given Microsoft s business practice of incorporating additional features 

(like i4i s invention) into Word without increasing the price (which it does to 

entice customers to buy a new version), the court properly admitted Wagner s 

testimony that he turned to other accepted methods for determining the value of 

XML technology. Specifically, Wagner looked at the market at the time of the 

hypothetical negotiation and selected a benchmark that was the cheapest of those 

identified by Microsoft and, in fact, Microsoft itself used. Moreover, contrary to 

Microsoft s assertion, Wagner considered the Georgia Pacific factors, analyzing 

them at length. Finally, while Microsoft criticizes Wagner s reliance on the 25% 

rule, this Court has recognized that the rule is widely accepted. 

Microsoft also challenges the district courts enhancement of damages, 

which relied on the jury s finding of willful infringement and Microsoft s litigation 

misconduct. But the jury found willfulness after being accurately instructed on the 

law, its verdict was supported by substantial evidence, and the court acted well 

within its discretion in enhancing damages by only 20 percent. 

Microsoft also asserts that because it destroyed the general market for i4i s 

product leaving i4i to sell to only a specialized set of customers and making it no 

longer a Microsoft competitor the court abused its discretion in finding that i4i 

was entitled to an injunction because it was irreparably harmed. Microsoft seems 

44

to think that only companies operating on a scale similar to the infringer should be 

entitled to injunctive relief, but that is not the law. i4i was irreparably harmed 

when Microsoft usurped the market from one of its Partners, and the harm 

continues for the simple reason that i4i can no longer compete. 

Moreover, the equities tip in i4i s favor. Here, i4i began selling products 

covered by the 449 patent before Microsofts infringement, and the accused 

functionality in Word can be removed without any impact on the overall product. 

In short, the injunction is both proper and necessary to protect i4i s rights. 

V. ARGUMENT 

A. Standard of Review 

i4i agrees with Microsoft s stated standards of review except as noted here 

and below. While the Fifth Circuit reviews timely challenges to jury instructions 

for abuse of discretion, challenges raised after the jury s consideration are 

reviewed only for plain error, an exceedingly deferential standard. Dahlen v. 

Gulf Crews, Inc., 281 F.3d 487, 494 (5th Cir. 2002) (citation omitted). Federal 

Circuit law applies to questions regarding jury instructions on issues of patent law, 

and errors will not change the result unless they had prejudicial effect. Sulzer 

Textil A.G. v. Picanol N.V., 358 F.3d 1356, 1364 (Fed. Cir. 2004). 

In its principal brief, Microsoft has not challenged any of the district court s 

holdings regarding waiver, thus waiving its ability to challenge those holdings on 

45

appeal. SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed. 

Cir. 2006). 

B. Because the District Court Correctly Construed the Claims, 

the Infringement Verdict Must Stand 

Microsoft only challenges infringement under its own erroneous 

construction. Microsoft argues that the district court read distinct out of the 

claims by not construing them to include two additional requirements: 

(1) independent manipulation of the metacode map and mapped content 

(MSBr.23,27-29); and (2) that the metacode map and mapped content be stored in 

separate files (MSBr.23,26-27). As shown below, however, the court followed 

the patent s teachings and did not read distinct out of the claims. 2 

1. Microsoft s Attempt to Require Independent 

Manipulation Directly Contradicts the Patent s 

Teachings 

Microsoft urges the Court to read independent manipulation into the 

claims. MSBr.27-29. Microsoft s argument, however, contradicts an important 

aspect of the invention. The 449 patent s specification instructs that changes to 

one aspect of a document the mapped content or metacode map must result in 

changes in the other aspect to keep the two parts synchronized. See supra at 15. 

2 Microsofts argument that all storage is distinct (MSBr.23) ignores that the 

court s construction provides both that the metacode map is a data structure 

(A116), which is a distinct entity, and that the document parts are each stored in 

their own portion of memory (id.), which also preserves the notion of distinct 

in the claims. 

46

Microsoft s construction, which prohibits synchronization of the document s two 

parts (MSBr.22-23,27-28), flies in the face of the patents teaching. It must, 

therefore, be rejected. See SanDisk Corp. v. Memorex Prods., Inc., 415 F.3d 1278, 

1285 (Fed. Cir. 2005) (stating that a construction that excludes a preferred 

embodiment must be wrong ). 

Microsoft s reliance on the patent s teaching about preventing certain users 

from modifying a document s content (see supra at 15) is flawed. That teaching is 

consistent with synchronization because the restriction is based on a user s ability 

to edit content, not how the system ensures consistency between the two document 

parts. As the patent describes, synchronization is done by the processing system, 

while content-restriction is directed at certain individuals. See supra at 

15;A252(7:12-14). The district court thus correctly recognized that restricting a 

user s access is just one way of using a decomposed document (A72), and provides 

no reason for the Court to adopt Microsoft s construction. At most, restricting a 

user s access represents an alternative embodiment, and Microsoft s construction 

would improperly limit the invention to one example in the specification. See 

Brookhill-Wilk 1, LLC, v. Intuitive Surgical, Inc., 334 F.3d 1294, 1301 (Fed. Cir. 

2003). 

47

2. There Is No Basis for Limiting the Claims to 

Separate Files 

By creating and distinctly storing the metacode map and mapped content, 

the invention allows a user to interact with one or the other as desired. See supra 

at 15. And the district court s construction requires storing each in a portion of 

memory. A116. In testifying regarding infringement, moreover, Rhyne focused 

on the separate and distinct nature of these portions of memory. See supra at 28. 

Accordingly, the district court s construction did not omit the distinct aspect of 

storage. MSBr.22-27. 

In fact, in pushing its separate files requirement, Microsoft disregards the 

specification. The patent states that a document can be edited by the invention 

irrespective of its mode of storage and never describes the need (or even 

desirability) of storing the metacode map and mapped content in separate files. 

See supra at 14. Moreover, the patent describes the document parts as 

structures, not files. A250(4:9,21). 

Microsoft points to Figure 2 (MSBr.25), but the use of separate boxes to 

illustrate the metacode map and mapped content does not indicate that the boxes 

show separate files. And even if the figure could be interpreted this way, the 

figures merely illustrate preferred embodiments, not the only embodiments, of 

the invention. A252(8:10-13). See Anchor Wall Sys., Inc. v. Rockwood Retaining 

Walls, Inc., 340 F.3d 1298, 1306-07 (Fed. Cir. 2003). 

48

Nor does the prosecution history show reliance on a particular mode of 

storage. MSBr.26. Microsoft quotes a passage describing separate entit[ies] and 

storing the map and the content of the documents separately, but that is 

completely consistent with i4i s position. Separate storage does not mean separate 

files and Microsoft makes no attempt to show otherwise. Instead, Microsoft 

merely assumes that storage and entity must mean file. MSBr.26-27 

( separate entity (that is, separate file) ). 

Microsoft s reliance on i4i s distinguishing of Kugimiya during prosecution 

gets it no further. i4i distinguished Kugimiya on the basis that it does not 

provide the decomposed document to the user. See supra at 17. This in no way 

suggested separate files. 

Microsoft s final prosecution-history argument, regarding Mizuta, is 

similarly flawed. Just as the district court recognized (A100-01), the applicant s 

statements noted only that Mizuta s meta-information was not at all similar to 

the invention s metacodes. See supra at 16. A remark that Mizuta stores all 

document information in one file (id.) did not define metacode map distinct 

storage means because nothing stored in the document file could qualify as 

metacodes and no document information was stored anywhere else. 

In fact, just a few sentences after its single file remark, i4i reiterated that 

the meaning of document in the invention was irrespective of its mode of 

49

storage. Id. Therefore, i4is comments about Mizuta were not a clear and 

unmistakable disclaimer of systems that do not store metacodes and content in 

separate files. See Omega Eng'g, 334 F.3d 1314, 1325-26 (Fed. Cir. 2003). 

3. The Correct Construction Requires Affirmance, But 

Even Under Microsoft s Construction, Disputed 

Issues of Fact Would Remain 

Because Microsoft s proposed constructions contradict the 449 patent s 

express teachings, this Court should affirm the verdict of infringement. Even if the 

Court were to agree with Microsoft on the construction, however, it should remand 

to allow resolution of disputed facts, including, at a minimum, infringement under 

the doctrine of equivalents. See Exxon Chem. Patents, Inc. v. Lubrizol Corp., 137 

F.3d 1475, 1478-79 (Fed. Cir. 1998). 

C. The District Court Properly Refused to Overturn the Jury s 

Findings that the Patent Is Not Invalid 

By failing to discuss its waiver of certain post-verdict challenges, 

Microsoft s arguments regarding the prior art should be viewed with skepticism. 

But regardless of its waiver, Microsoft merely points to the evidence it presented 

rather than addressing all the evidence before the jury. The full record shows that 

there is more than substantial evidence to support the verdict and Microsoft raises 

nothing more than a credibility challenge. 

50

1. Microsoft Waived Its Challenge to Issues of Fact 

Relating to Prior Art Other Than Anticipation by 

SEMI-S 4 

The district court correctly observed that when Microsoft moved for JMOL 

at the close of evidence, it sought only invalidity based on the SEMI S4 product. 

A25. As Microsoft then explained, We believe the evidence presented establishes 

conclusively that it was sold more than a year before and that it embodied the 

patented invention. Id. In arguing only the on-sale bar of section 102(b), 

Microsoft waived its ability to challenge the factual findings regarding any other 

theory of invalidity, including obviousness. See Duro-Last, Inc. v. Custom Seal, 

Inc., 321 F.3d 1098, 1107-08 (Fed. Cir. 2003). Microsoft is thus foreclosed from 

challenging the factual issues underlying nonobviousness here: (1) the scope and 

content of the prior art Microsoft asserted at trial; (2) the differences between the 

prior art and the claims; (3) the lack of a reason for a skilled practitioner to 

combine the teachings of that art; and (4) secondary considerations of 

nonobviousness, including a nexus to the claims. See KSR Int l Co. v. Teleflex, 

Inc., 550 U.S. 398, 406, 415 (2007). 

Given the posture of the case, therefore, the following facts may not be 

challenged on appeal: 

51

(1) the Rita software that was analyzed by Microsoft s expert (Gray) at 

trial was not the same as the Rita software that was on sale more than a year before 

the 449 patent was filed (see supra at 31); 

(2) both Rita and DeRose lacked the metacode map, mapped content, 

and address of use limitations (see supra at 32); 3 

(3) Kugimiya does not teach the providing limitations (see supra at 17); 

(4) there is no reason to combine the teachings of Kugimiya with either Rita 

or DeRose (see supra at 33); and 

(5) numerous secondary considerations support the nonobviousness of the 

invention (see supra at 33). 

Since the jury must be presumed to have decided all these critical factual 

determinations against Microsoft, there can be no question that the decision below 

concerning validity should be affirmed. Moreover, Microsoft would have no 

chance of success even if it had preserved its challenges below because substantial 

evidence here supports the verdict. See Group One, Ltd. v. Hallmark Cards, Inc., 

407 F.3d 1297, 1304 (Fed. Cir. 2005). 

3 Microsoft tries to paint i4i as being inconsistent because, like Rita and DeRose, 

i4i s products use a tree structure. MSBr.37. But Microsoft neglects the fact that 

i4i s products also use an offset map, which meets the metacode map limitation. 

A2314-18;A2317(69:1-2(tree structure), 3-13(offset map)). When questioned by 

Microsoft s counsel, Rhyne explained that i4i s product is a three-layer product 

that uses a tree structure in only one of its layers. A2320. 

52

2. Substantial Evidence Supports the Jury s 

Determination That SEMI-S 4 Did Not Invalidate the 

Claims 

Both inventors (Vulpe and Owens) testified that SEMI-S 4 did not practice 

the invention of the 449 patent, which they conceived after installing that product. 

See supra at 10. Documentary evidence showed how and when Vulpe 

communicated the conception of the invention underlying the 449 patent to his 

patent attorney (A7788-91), and how and when Owens sent a draft patent 

application to the attorney (A7775-87). That evidence corroborated the inventors 

testimony regarding their conception. Moreover, Rhyne discussed how source 

code was critical to credibly evaluating infringement. See supra at 30. In short, 

the jury was entitled to reject Microsoft s evidence and rely instead on the 

inventors testimony and corroborating documents, and expert testimony, to find 

that SEMI-S 4 did not practice the limitations of the asserted claims. 

In asserting otherwise, Microsoft makes several contentions that purportedly 

establish a prima facie case that the SEMI S 4 System as sold did embody the 449 

Patent. MSBr.40. Microsoft is wrong. 

First, the pages Microsoft cites (MSBr.40) from the SEMI-S 4 s User Guide 

(A3472-74) do not show that it allowed the metacodes to be manipulated 

separately from the content. Instead, they discuss the software at a high level and 

only decomposing the document into sections and subsections, which Owens 

53

explained did not involve separating metacodes from content for editing (A825- 

26). Other pages (A3572-73 and A3578-82) show the Document Outline View 

of the Editor Screen. The Document Outline View allowed navigation among 

tags but there is no indication that it allowed editing the tags or that SEMI-S 4 

created a metacode map with addresses of use. A3583;A823. As Rhyne 

explained, the source code is needed to make that determination the user s guide 

is insufficient. See supra page 30;A1958-59(Microsoft s Little agreeing that 

source code is necessary to determine infringement). 

Microsoft also points to a 1994 letter to potential investors in which Vulpe 

stated that [t]he basis for the patent and the preliminary work on the vali[d]ation 

precedes i4i, which was founded in 1993. MSBr.40-41. But as Vulpe candidly 

admitted, he exaggerated the early development of the invention in discussions 

with potential investors in order to avoid any misunderstandings about who owned 

the patent rights. A1695-700. As it turned out, though, there was never an 

ownership dispute: Vulpe and Owens voluntarily and without extra compensation 

assigned their rights to i4i. A1700. The jury saw the letter, heard Vulpe s 

explanation, and obviously believed him. This is a classic issue of credibility, 

which the jury resolved in i4i s favor. 

Microsoft makes much of Vulpe s representations to IRAP concerning the 

inventors ongoing work to reduce the invention to practice (MSBr.41), but Vulpe 

54

explained that this did not involve any work on SEMI-S 4 . A1753-54; see supra at 

12. Instead, in describing Infrastructure s S 4 product, Vulpe was referring to 

Owens s rewriting of the SEMI-S 4 source code for sale as a commercial product 

and to incorporate the invention s functionality. See supra at 12. There is nothing 

inconsistent in Vulpe s testimony that i4i never modified the SEMI-S 4 architecture 

after it was installed in early 1993 (MSBr.41), since nothing showed that the 

invention was actually part of SEMI-S 4 at any time. 

Finally, Microsoft cites the testimony of Scott Young, a former i4i employee 

who claimed he heard Vulpe say that SEMI-S 4 incorporated the 449 patent. 

MSBr.41-42. Young was not technically trained (A2305(57:16-22)), currently 

works for a gold certified partner of Microsoft (A1986), admitted to never 

having seen SEMI-S 4 s source code (A1982;A2300), and had sued i4i in the past 

(A1987). The jury could have decided that Young misheard Vulpe or did not 

understand what he said, or it could have rejected Young s entire testimony as 

lacking credibility. But whatever the jury decided, its decision cannot be 

overturned just because Microsoft likes what Young said. 

Microsoft further asserts that an inventor s testimony regarding dates always 

requires corroboration if it would rebut invalidity. MSBr.43-44. This assertion is 

wholly unsupported. First, i4i did not rebut invalidity through inventors assertions 

alone, but also offered documentary evidence (including the patent filing and 

55

multiple disclosures of the invention) as well as expert testimony. See supra at 10. 

Moreover, this Court has never required corroboration in all instances, and there is 

no reason to do so here, where the corroboration that Microsoft demands is to 

confirm that the inventors did not do something (i.e., conceive their invention at an 

earlier date than they say). 

The cases cited by Microsoft are not to the contrary. First, corroboration 

arises when challenging the validity of a patent, because of the presumption of 

validity. Price v. Symsek, 988 F.2d 1187, 1194 (Fed. Cir. 1993). Further, the 

relevance of record keeping in evaluating an experimental purpose, U.S. 

Environmental Products, Inc. v. Westall, 911 F.2d 713, 718 (Fed. Cir. 1990), has 

no bearing on the question here whether SEMI-S 4 practiced the claims. 

Moreover, because Microsoft lacked sufficient evidence to prove SEMI-S 4 

practiced the claims (see supra at 30), there was no prima facie case for i4i to 

rebut. 

In sum, substantial evidence supports the jury s finding that Microsoft failed 

to carry its burden of proving invalidity. The issues regarding SEMI-S 4 were 

credibility and factual determinations for the jury. 

56

3. The District Court Did Not Abuse its Discretion by 

Preventing Microsoft from Arguing to the Jury that 

the PTO s Grant of a Reexamination Supported 

Invalidity 

Microsoft s last-ditch assertion that the Court should grant a new trial based 

on the district court s exclusion of evidence regarding the ongoing reexamination 

of the 449 patent is meritless. See MSBr.46. As this Court recently held in 

Callaway Golf Co. v. Acushnet Co., No. 2009-1076, 2009 WL 2481986, at *9 

(Fed. Cir. Aug. 14, 2009), [t]he nonfinal re-examination determinations were of 

little relevance to the jury s independent deliberations on the factual issues 

underlying the question of obviousness. In contrast, the risk of jury confusion if 

evidence of the non-final PTO proceedings were introduced was high. 

4. Microsoft Provides No Reason to Overturn the Clear 

and Convincing Standard for Invalidity 

Microsoft implicitly admits that it presents an argument here that conflicts 

with this Court s precedent. MSBr.45. Microsoft asks the Court to hold that an 

accused infringer need only prove invalidity by a preponderance of the evidence 

when asserting prior art not presented to the examiner. Id. Such a holding would 

contravene the clear language of 35 U.S.C. § 282 and this Court s binding case 

law. See, e.g., Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1375 

(Fed. Cir. 1986) (when considering prior art not before the examiner the 

57

presumption remains intact and on the challenger throughout the litigation, and the 

clear and convincing standard does not change ). 

D. The Jury s Finding of Indirect Infringement Relied on 

Proper Instruction from the District Court and Sound 

Evidentiary Support 

The record evidence firmly established both forms of indirect infringement 

and, contrary to Microsoft s arguments (MSBr.47-48), the jury instructions 

properly recited the law of contributory infringement. Because the court properly 

instructed the jury, or at most committed harmless error, Microsoft s arguments 

only address whether the jury had sufficient evidence regarding the nature of the 

goods Microsoft sold or its level of intent. Accordingly, this Court should affirm 

the infringement verdict even if it determines that the jury reasonably concluded 

that Microsoft either induced or contributorily infringed. See Walther v. Lone Star 

Gas Co., 952 F.2d 119, 126 (5th Cir. 1992); Northpoint Tech., Ltd. v. MDS Am., 

Inc., 413 F.3d 1301, 1311-12 (Fed. Cir. 2005). 

1. Microsoft Misapplies this Court s Cases to Argue that 

Sellers of Software Will Always Avoid Contributory 

Infringement 

Microsoft attacks the jury instructions on contributory infringement, which 

stated that Microsoft could be held liable if it sold a component for use in 

58

practicing the patented method. MSBr.47-48. 4 Admittedly, the instructions used 

component instead of material or apparatus as provided in section 271(c), but 

even if this technicality can rise to the level of error, it is harmless. 

There is no meaningful difference between the bare words component and 

material or apparatus in the context of section 271(c). Indeed, this Court used 

component as essentially synonymous with section 271(c) s material or 

apparatus in the context of a method claim in Ricoh Co. v. Quanta Computer, 

Inc., 550 F.3d 1325, 1340 (Fed. Cir. 2008) (finding section 271(c) liability because 

Quanta's optical disc drives contain hardware or software components that have 

no substantial noninfringing use other than to practice Ricoh's claimed methods ) 

(emphasis added). Similarly, Rhyne testified that Microsoft sold a component or 

apparatus for use in practicing the patented method. A1211-12. 

Contrary to Microsoft s argument (MSBr.47-48), Cardiac Pacemakers, Inc. 

v. St. Jude Med. Inc., No. 2007-1296, 2009 WL 2516346 (Fed. Cir. Aug. 19, 

2009), did not compel anything different. Rather, the Court discussed section 

271(c) to illustrate[] the contrasting treatment that Section 271 gives to tangible 

inventions and method inventions. Id. at *13. Because section 271(f) only 

concerns a component, the Court used section 271(c) to show that a material or 

4 The court did not, as Microsoft s heading III.A asserts, instruct the jury that 

liability arose from selling a component of i4i s claimed methods. MSBr.47. 

59

apparatus for use in practicing a patented process is not a component of that 

process, therefore confirming that the components of a method are the steps 

that comprise the method ... but the steps are not the physical components used in 

the performance of the method. Id. (emphasis added). Cardiac Pacemakers did 

not focus on the difference between a component and a material or apparatus 

so much as it focused on the difference between the language for use in practicing 

a patented process and of a patented product. The instruction here, therefore, 

did not violate Cardiac Pacemakers because, while it refers to a component, it 

does not refer to a component of the invention, but rather a component for use 

in practicing the invention. 

And Microsoft does not deny that the parties tied their respective 

infringement theories to what Microsoft actually sold (software) and how 

computers running that software operated, as opposed to semantics concerning 

whether software is more properly called a component or a material or 

apparatus. Thus, Microsoft cannot show that the result could possibly have been 

different if the district court had quoted the statute verbatim and told the jury it 

could find for i4i if Microsoft sold a material or apparatus for use in practicing a 

patented process. See Sulzer Textil, 358 F.3d at 1364. 

Microsoft s actual and much more radical argument is that, as a maker of 

software, it s categorically immune from section 271(c) liability because intangible 

60

software indisputably cannot qualify as a material or apparatus. MSBr.48. 

Microsoft cites no authority for this proposition and, in fact, it should be rejected. 

The idea that material or apparatus does not include intangible things is 

contradicted by the plain meaning of material. Merriam-Webster s Online 

Dictionary includes numerous definitions of abstract or intangible material. 

See http://www.merriam-webster.com/dictionary/material (including as material : 

(1) : something (as data) that may be worked into a more finished form . . . 

(2) : something used for or made the object of study ). 

In any event, the district court correctly held that Microsoft did not properly 

preserve its argument that software is somehow exempt from section 271(c). A17. 

While Microsoft objected to the jury instructions on a technical departure from the 

statute, it did not argue that section 271(c) covers only tangible items (i.e., not 

software). A17;A5692. Therefore, this Court need not decide here whether the 

sale of software can give rise to contributory infringement liability. 

2. The Question of Substantial Noninfringing Uses 

Considers Word s Custom-XML Functionality, Not 

All of Word 

Microsoft s argument that the issue of substantial noninfringing uses 

requires consideration of the entirety of the Word software (rather than the 

infringing custom-XML portion) conflicts with Ricoh. There, the Court flatly 

61

ejected the proposition that embedding an infringing product in another product 

with noninfringing uses can avoid infringement. 550 F.3d at 1337. 

The issue here is no different. In selling Word, Microsoft sells the custom- 

XML portion, which evidence showed is separable. See supra at 28. If this Court 

were to accept Microsoft s position, companies would be able to escape liability 

simply by distributing infringing software as part of an omnibus collection of 

functionality. 

Microsoft misreads Hodosh v. Block Drug Co., 833 F.2d 1575 (Fed. Cir. 

1987), as always requiring evaluation of the possible noninfringing uses of the 

product as a whole. MSBr.49-50. There, the infringer attempted to escape liability 

by pointing at one noninfringing component in the product sold. 833 F.2d at 1578. 

Hodosh fully comports with Ricoh the purpose of section 271(c) was to enable 

enforcement of patents when practical realities would make it difficult otherwise. 

Id. In Ricoh, while the factual situation was essentially the opposite the infringer 

sold a product containing an infringing portion the Court reached the same 

conclusion for the same reason any other result would contravene Congress s 

intent. 550 F.3d at 1337. The statute, therefore, applies not only to the bare sale 

of an infringing component, but also to the sale of that component as part of a 

product or device. Id. 

62

3. Substantial Evidence Supports the Jury s Finding 

that the Accused Functionality of Word Does Not 

Have Substantial Noninfringing Uses 

Microsoft also contends that the district court erred in refusing to overturn 

the jury s verdict that Word s custom-XML functionality lacks any substantial 

noninfringing use (MSBr.51), but it never addresses the evidence supporting the 

verdict. Rhyne testified at length why the three allegedly noninfringing uses 

offered by Microsoft were occasional, inefficient, uneconomical, impractical, 

and/or hypothetical. See supra at 28; Hoffmann-La Roche, Inc. v. Promega Corp., 

33 U.S.P.Q.2d 1641, 1648 (N.D. Cal. 1994). The substantial noninfringing uses 

Microsoft proposed involve (1) no content, (2) never reopening a document, or (3) 

saving XML documents in a format (the .doc or .dot format) that cannot be 

shared across applications, none of which constitutes a substantial noninfringing 

use. See supra at 28. 

Despite Microsoft s cherry-picking argument (MSBr.51-52), Weckers 

survey is not to the contrary. Wagner explained why the numbers from Wecker s 

survey do not amount to substantial use regardless of whether the act infringed. 

A1501. In sum, the jury was entitled to find there were no substantial 

noninfringing uses for Word s custom-XML functionality. 

63

4. i4i Presented Evidence of Microsoft s Intent Sufficient 

to Support the Requisite Level for Contributory and 

Induced Infringement 

Microsoft glosses over the evidence that it argues is insufficient to show it 

knew of the 449 patent and also that it infringed. MSBr.52-53. Indeed, in its 

superficial summary, Microsoft ignored the indisputable fact, noted by the district 

court, that Microsoft was provided with an explanation of i4i s patented 

technology along with the patent number starting in April 2001 and continuing 

through 2003. A14-15(citing A945-47(79:20-81:22);A945(79:5-9);A948(82:4- 

11);A1004-06(138:9-140:22);A7240;A1666-69(5:16-8:1);A1016-17(8:7-9:22); 

A7243-44;A7279-88;A7241;A7276-78;A1200-02(16:5-18:18);A7302-03). All 

this evidence relates to Microsoft s intent to contribute to or induce the 

infringement of others. See supra at 19-25. 

Additionally, in arguing that its knowledge of i4i s patent triggered no duty 

to investigate possible infringement (MSBr.54), Microsoft wrongly relies on Voda, 

which was a willfulness case (536 F.3d at 1327-29), and ignores Broadcom, where 

this Court expressly refused to apply willfulness law in the inducement context 

(543 F.3d at 699). Indeed, the Broadcom Court upheld the jury s inducement 

verdict based on evidence that was of precisely the same type that i4i provided in 

this case a failure to investigate, a failure to explore design around approaches, 

a failure to take remedial steps and, of course, a failure to seek legal advice. Id. 

64

at 700. After working with i4i as a Partner to supply the government a solution 

comprising Word and i4i s patented products during which time Microsoft 

learned of the 449 patent and that it covered i4i s products Microsoft without 

doubt had the requisite knowledge of the patent and its contents. See supra at 21. 

E. The Court Should Affirm the Damages Award 5 

1. Standard of Review 

Microsoft did not move for JMOL on damages (A2254-56), filing only a 

motion for new trial and alternative motion for remittitur (A7978-79). This Court 

reviews the denial of a new trial on damages for abuse of discretion. Micro Chem., 

Inc. v. Lextron, Inc., 317 F.3d 1387, 1394 (Fed. Cir. 2003). 

On appeal, Microsoft does not address the district court s extensive opinion 

on damages or explain how the court abused its discretion. Instead, Microsoft 

rehashes the same two arguments it presented in its new trial motion: that the 

Wecker survey should not have been admitted and that Wagner s Georgia-Pacific 

analysis should have been excluded. MSBr.55-66. As explained below, the 

district court did not abuse its discretion in either regard. 

5 The amicus brief of the Washington Legal Foundation ( WLF ) advances broad, 

generalized arguments in support of Microsoft on the issues of damages, 

willfulness, and the injunction, but adds nothing meaningful to Microsoft s 

arguments. 

65

2. The Wecker Survey Was Properly Admitted 

Citing Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 487-88 (5th 

Cir. 2004), Microsoft identifies six reasons why the Wecker survey allegedly 

should not fall within a hearsay exception. MSBr.55. But the survey was not 

admitted as a hearsay exception. As the district court recognized (A35), Federal 

Rule of Evidence 703 governed admissibility because Wecker s and Wagner s 

opinions both relied upon the survey results. See, e.g., Federal Judicial Center 

Reference Manual on Scientific Evidence (2d ed. 2000) at 233; Soden v. 

Freightliner Corp., 714 F.2d 498, 502-03 (5th Cir. 1983). Under Rule 703, 

surveys are admissible if reliable and . . . compiled in accordance with accepted 

survey methods. C.A. May Marine Supply Co. v. Brunswick Corp., 649 F.2d 

1049, 1054 (5th Cir. 1981). The district court did not abuse its discretion in 

finding that the survey met this standard. 

Indeed, Microsoft s six criticisms of the survey all lack merit. The first 

that the survey inadequately screened respondents (MSBr.56) rests on inaccurate 

and cropped quotes from the screening questions. Those questions identified IT or 

computer administrators whose job it was to know what software had been 

installed and used by others within their businesses. A1549-52;A1581-82;A7962- 

75. The third screening question required respondents to confirm they were the 

right person to speak with. A4246. The district court did not abuse its discretion 

66

in concluding that the screening questions filtered the survey to persons most likely 

to know about the amount and type of use of Word and XML. A37. In addition, 

respondents always had the option to answer don t know to any question, further 

guarding against conjecture. A4244-58;A1552. 

Microsoft s second point that the survey is legally flawed because it asked 

about another coworker s use of Word and XML (MSBr.56-57) should also be 

rejected. The district court found that [t]he survey was directed to computer 

administrators within an organization who would have personal knowledge 

concerning how individuals within that organization used the accused WORD 

products. A37; see supra at 34. The case Microsoft cites (MSBr.57) United 

States v. Carlock, 806 F.2d 535, 552 (5th Cir. 1986) does not deal with surveys. 

Contrary to Microsoft s third assertion (MSBr.57-58), seeking data going 

back five years does not encourage guessing. First, 88% of the units estimated to 

infringe did so at least once in 2008. A4243. Further, because exact answers 

would be impossible and unnecessary, telling respondents that your best estimate 

is fine is reasonable, especially where they are also given the option of answering 

don t know. See Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. 

v. Mega Sys., 350 F.3d 1327, 1345 (Fed. Cir. 2003) ( Determining the amount of 

damages to award . . . is not an exact science, and the methodology of assessing 

67

and computing damages is committed to the sound discretion of a district court. 

(citation omitted)). 

This Court should also reject Microsoft s fourth argument that the 

questions were too confusing or difficult because some of the respondents gave 

internally inconsistent answers (MSBr.58). Microsoft fails to show even one 

question that is inherently confusing. Wecker testified that it is important to 

interpret confusion or inconsistency in survey answers. A1556-61;A8047;A8051- 

93;A8095-104. He also testified that the total amount of the inconsistencies 

affected his estimate by only a little over 16%, and that the vast majority of that 

(about 15%) was the result of one answer a respondent answering 3% of 4 units 

when it was clear that the individual must have meant 3 units out of 4. A1556- 

59;A1561;A38. 

Finally, Microsoft s fifth and sixth arguments that the survey of 988 

respondents had an incredibly low response rate of 46 are also meritless. 

MSBr.59. A 50% response rate or higher is necessary only if a survey is used to 

infer the behavior of non-respondents (see A8046), so perhaps an allegedly low 

response rate would be an available criticism if Wecker had assumed, on a pro rata 

basis, that the 942 non-respondents would have behaved similarly to the 46 

respondents which would have resulted in an infringement rate of 41.3%. Here, 

however, Wecker counted all of the non-respondents as noninfringing and only the 

68

19 positive respondents as infringing resulting in an infringement rate of just 

1.9%. See supra at 35. This was the most conservative approach possible, and 

Microsoft has no room to complain. 

3. Wagner s Georgia-Pacific Analysis Was Properly 

Admitted 

Microsoft next argues that Wagner s entire reasonable-royalty analysis 

should have been excluded under Daubert v. Merrell Dow Pharmaceuticals, Inc., 

509 U.S. 579 (1993). MSBr.55. But under Daubert, expert testimony that can 

assist the trier of fact should be admitted where the reasoning or methodology 

underlying the testimony is scientifically valid and . . . that reasoning or 

methodology properly can be applied to the fact at issue. Id. at 592-93. 

Vigorous cross examination, presentation of contrary evidence, and careful 

instruction on the burden of proof not exclusion are the traditional and 

appropriate means of attacking expert testimony. Id. at 596. 

The district court did not abuse its discretion in finding Wagner s testimony 

admissible. As the court found, Wagner s methodology including using the 

Georgia-Pacific factors, selecting a third-party benchmark given Microsofts 

business strategy of adding valuable features to Word without raising its price, and 

relying on the 25% rule of thumb was reliable and relevant to determining a 

reasonable royalty. A39-41. 

69

Microsoft first complains that i4i s royalty rate of $98 per unit exceeds the 

entire price of certain editions of Word. MSBr.60. Notably, Microsoft cites no 

evidence to support the suggestion that the infringing units used by businesses 

the only units involved in the royalty calculation sold for less than $98. A1385- 

86. To the contrary, the evidence showed that all of these units cost more than 

that, most costing $229. A8049. 

Further, Microsoft ignores that the royalty equates to a mere $2 per unit for 

all sales of Word that include custom-XML. See supra at 37. Of course, 

Microsoft only owes damages on units used in an infringing manner, but a 

reasonable licensor and licensee would certainly consider the impact of a royalty 

on total product sales. See supra at 24. In any event, the royalty rate does not in 

itself show that the court abused its discretion in admitting Wagner s testimony. 

See, e.g., Monsanto Co. v. McFarling, 488 F.3d 973, 980-81 (Fed. Cir. 2007) 

(affirming a royalty rate higher than the cost of the product where evidence 

supported the verdict). 

Microsoft next argues that Wagner did not analyze the Georgia-Pacific 

factors. MSBr.60-61. This is simply untrue. A1381-82;A1397-1408;A40-41. 

That Wagner started his analysis by selecting the XMetal benchmark does not 

undermine his consideration of those factors. Indeed, as the district court found, 

the very use of a benchmark relates to the Georgia-Pacific factors, including any 

70

evidence probative of the value of the use of the invention and the benefits to its 

users. A40. 

Although Microsoft admits that it may be proper to use a benchmark 

(MSBr.62), it asserts that Wagner erroneously used as his starting point a high- 

end XML editor (SBr.61), questioning Wagner s choice of XMetal (MSBr.62). 

As the district court concluded, however, given that the methodology employed by 

Wagner was appropriate, the question of whether Xmetal was the best 

benchmark was properly submitted to the jury. A40. Indeed, the jury 

considered all of Microsoft s specific criticisms including that XMetal had 

additional functionalities and the $50 price difference between two versions of 

Office. A2175-78;A1468;A1470-75. Moreover, Wagner s explanation for why he 

chose XMetal was reasonable. See supra at 36. 

Microsoft also complains that Wagner should not have applied the so- 

called 25% Rule. MSBr.64. As the district court noted, however, Microsoft 

both cross-examined Wagner on the application of the rule and presented contrary 

evidence. A40. Moreover, courts have found the 25% rule of thumb to be a well- 

established approach for calculating damages. Bose Corp. v. JBL, Inc., 112 F. 

Supp. 2d 138, 167 (D. Mass. 2000), aff d, 274 F.3d 1354 (Fed. Cir. 2001); Uniloc 

USA, Inc. v. Microsoft Corp., C.A. No. 03440S., 2009 WL 691204, at *1 (D.R.I. 

71

Mar. 16, 2009) (denying Daubert motion attacking expert s reliance on 25% rule). 

Accordingly, Wagner s testimony on the 25% rule was properly admitted. 

4. Microsoft Fails to Show Why the Royalty Is Excessive 

Microsoft also argues that the jury verdict is excessive and warrants a new 

trial or remittitur. MSBr.66. But because Microsoft did not file a JMOL on this 

issue, the sufficiency of the evidence is not at issue, and Microsoft does not claim 

any abuses of discretion other than those alleged above. Thus, for the same 

reasons discussed above, the district court did not abuse its discretion in denying 

Microsoft s motion. 

F. The District Court Had Solid Grounds on Which to 

Enhance the Jury s Award of Damages 

1. The District Court Properly Refused to Overturn the 

Jury s Willfulness Finding in Light of i4i s Evidence 

The district court correctly concluded that substantial evidence supported the 

jury s verdict of willful infringement under the two-prong test of In re Seagate 

Techs., LLC, 497 F.3d 1360 (Fed. Cir. 2007). A20-24. The jury was properly 

instructed on the Seagate test, which presents issues of fact for the jury to resolve. 

Cohesive Techs., Inc. v. Waters Corp., 543 F3.d 1351, 1374 (Fed. Cir. 2008). 

As discussed above (see supra at 21, 64), substantial evidence supports the 

jury s finding that Microsoft not only had knowledge of the patent, but also had 

knowledge that its actions would infringe the patent, satisfying the subjective 

prong of Seagate. 

72

Likewise, the district court did not err in denying JMOL in regard to the 

objective prong of Seagate, as substantial evidence supports the jury s findings on 

that issue. As the court recognized, the jury s wholesale rejection of Microsoft s 

case supports the conclusion that Microsoft had no strong defenses. A20. Review 

of Microsoft s arguments on appeal shows the hollowness of its case. Microsoft 

challenges infringement based only on an allegedly erroneous claim construction 

and the construction Microsoft urges contradicts both the specification and this 

Court s precedent. On invalidity, Microsoft does not even appeal several of its 

allegedly meritorious positions from trial (MSBr.69), and the issues it does raise 

fare no better. SEMI-S 4 preceded the invention here and Microsoft presented 

wholly inadequate evidence that it practiced the invention. Rita and DeRose 

merely worked with SGML documents; they did not separate the document parts 

the heart of i4i s invention. Kugimiya, besides being considered by the PTO and 

rejected by the jury, also lacks limitations claimed by the 449 patent. In sum, 

Microsoft has not raised a serious challenge to i4i s claim of patent infringement. 

Microsoft nonetheless argues that, in considering the objective prong, the 

district court made three errors of law. MSBr.70-72. Microsoft is wrong. 

First, aside from the fact that the district court was correct in its observation 

that the objective prong focuses on the facts and circumstances surrounding an 

accused infringer at the time that it acts (A21), Microsoft mischaracterizes the 

73

court s opinion as finding Microsoft s invalidity and noninfringement defenses 

irrelevant (MSBr.70). The court actually held that the number of defenses 

Microsoft raised was irrelevant (A21) and questioned whether any of the defenses 

would have been apparent prior to the infringing activity (A22). None of the cases 

cited by Microsoft (MSBr.70-71) conflicts with the court s denial of JMOL. 

Indeed, the discussion of willfulness in Black & Decker, Inc. v. Robert Bosch Tool 

Corp., 260 F.App x 284, 291 (Fed. Cir. 2008), was nonprecedential dicta, and 

Cohesive Technologies, Inc. v. Waters Corp., 543 F.3d 1351 (Fed. Cir. 2008), 

affirmed a finding of no willful infringement based on a dispositive claim- 

construction defense. Here, even if Microsoft s claim construction were 

reasonable, it would not avoid infringement. See supra at 50. 

Microsoft s second argument that the district court did not independently 

analyze the strength of Microsoft s defenses makes no sense. See MSBr.71-72. 

In actuality, the court analyzed Microsoft s defenses; indeed, its well-reasoned 65- 

page opinion discusses those defenses at length. A7-19;A24-34;A60-68. That the 

opinion does not repeat that analysis in the willfulness discussion does not 

undermine its denial of JMOL. In any event, the court properly focused on 

whether substantial evidence supported the jury verdict and correctly concluded 

that it did. 

74

Microsoft also cites DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 

567 F.3d 1337 (Fed. Cir. 2009), arguing that the jury s verdict alone cannot 

support willfulness. MSBr.71-72. But here, the district court did not rely on the 

jury verdict alone. Moreover, in DePuy, this Court held that the record 

indisputably show[ed] that the question of equivalence was a close one, 

particularly insofar as equivalence requires an intensely factual inquiry. 567 

F.3d at 1337 (citation omitted). Here, nothing indicates that the factual questions 

were close. And in DePuy, the district court had previously granted, and this Court 

affirmed, summary judgment of no literal infringement (DePuy Spine, Inc. v. 

Medtronic Sofamor Danek, Inc., 469 F.3d 1005, 1016 (Fed. Cir. 2006)), a factor 

clearly relevant to the finding of no willful infringement in that case. 

Finally, Microsoft accuses the district court of requiring an affirmative duty 

of care. MSBr.72. But the court did no such thing. Instead, it merely explained 

why the objective analysis should not focus on what a reasonable person would 

have thought at the time of trial. A20-21. The court correctly recognized that 

Seagate s objective prong requires the consideration of relevant facts as of the time 

of infringement, not just some later time. A20-21; see 497 F.3d at 1371. 

2. The District Court Relied on Entirely Proper 

Grounds to Enhance Damages 

Microsoft also challenges the district court s enhancement of damages. The 

standards of enhancement, however, are distinct from the law of willfulness. As 

75

discussed above, while Seagate undoubtedly means that putative infringers are not 

required to obtain legal advice in order to avoid a willfulness finding, it did not 

overturn all standards of good faith. Read v. Portec, which set forth factors used in 

determining whether and how much to enhance damages including whether the 

infringer investigated the scope of the patent and formed a good-faith belief that it 

was invalid or that it was not infringed (970 F.2d at 827) remains good law. 

The district court did not err by considering how Microsoft acted despite its 

knowledge of i4i s patent. 

Microsoft is also wrong in arguing that the district court erred in considering 

its financial condition as a factor in deciding to enhance damages. MSBr.73. 

While Microsoft asserts that this factor was relevant, if at all, only to the extent 

of enhancement, not to whether to enhance damages (id.), it has no support for its 

position. Indeed, the case Microsoft cites (Read) expressly states that the above 

factors, including the infringer s financial condition, taken together assist the 

trial court . . . in determining whether to exercise its discretion to award enhanced 

damages. 970 F.2d at 828 (emphasis added); accord Jurgens, 80 F.3d at 1571. 6 

6 While Microsoft also asserts that Honda Motor Co. v. Oberg, 512 U.S. 415 

(1994), prohibits punishing a defendant based on its wealth (MSBr.73), the 

Oregon law the Court overturned in Honda prohibited courts from reviewing the 

amounts of punitive awards (which, of course, juries decide) except were 

supported by no evidence. 512 U.S. at 431-32. Enhanced damages for patent 

infringement are, of course, awarded by judges. 

76

And Microsoft misreads the law when it discusses its trial counsel s 

litigation misconduct and asserts that [t]his court has been absolutely clear that 

attorney . . . misconduct during litigation is not sufficient for an increased 

damages award under section 284. MSBr.73. Microsoft has distorted the Court s 

holding by omitting the words by themselves. What this Court actually held in 

Jurgens (which Microsoft clearly intended to cite, rather than Read) was that acts 

of litigation misconduct (whether by attorney or client) are not by themselves 

sufficient for an increased damages award under section 284. Jurgens, 80 F.3d 

at 1570. 7 But i4i has never asserted that litigation misconduct by itself would 

support enhanced damages, but only that it is a factor, and the district court 

correctly recited the law on this point (see Jurgens, 80 F.3d at 1570-71; Read 970 

F.2d at 828), stating that Microsoft s counsel s misconduct could be considered in 

determining whether to award enhanced damages and how much to award. A42. 

Concerning the substance of Microsoft s misconduct, its assertion that 

Microsoft s counsel was obligated to show that one of two plaintiffs had no 

business other than litigation makes no sense. MSBr.74. As Microsoft knew, i4i 

practiced the patented invention. See supra at 21. The court warned Microsoft s 

counsel during voir dire not to argue to the jury that i4i LP misused its patent by 

7 This Court has previously frowned upon similar omissions from an opinion that 

distorted the meaning of the Court s language. See, e.g., Precision Specialty 

Metals, Inc, v. United States, 315 F.3d 1346, 1355 (Fed. Cir. 2003). 

77

asserting it without practicing the invention itself. A625-27. However, counsel 

referred to the case as a banker case both during his opening statement (A722) 

and during closing argument (A2505-06). All this despite agreeing before trial to 

refrain from such arguments. See A7000-01. 

The district court weighed each of the applicable Read factors and concluded 

that they favored enhancement, albeit far less than the law permits. A43-48. The 

court was well-positioned to evaluate the relevant factors and did not abuse its 

discretion. See Amsted Indus., Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 

184 (Fed. Cir. 1994). 

G. The District Court Did Not Abuse Its Discretion in 

Granting an Injunction 

In its brief, Microsoft attempts to create hard-line rules requiring certain 

types of evidence for entry of an injunction. But the decision whether to grant or 

deny injunctive relief is not rigid, but rather rests within the equitable discretion 

of the district courts. eBay, 547 U.S. at 391. Here, the district court properly 

evaluated the eBay factors, concluding that all four weigh in favor of injunctive 

relief. A51-57. None of Microsoft s arguments shows otherwise. 

Microsoft first argues that the court relied on i4i s conclusory statements 

regarding generic harm to find i4i was irreparably harmed by Microsoft s 

infringement. MSBr.75. But the court s analysis was grounded in evidence, 

relying on both testimony (A1677;A891;A1399-401;A1476) and documents 

78

(A7304;A7367;A7302-03) to support its conclusions that (1) i4i competes with 

Microsoft in the custom-XML market, (2) Microsoft s infringement rendered i4i s 

products largely obsolete in the market, and (3) i4i has been irreparably injured by 

Microsoft s continuing infringement (A52). Moreover, the court relied on 

Microsoft s own documents, which accurately predicted the harm to i4i, stating: 

[I]f we do the work properly, there won t be a need for their [i4i s] product 

(A7367;A44); and [W]e saw [i4i s product] some time ago and met its creators. 

Word 11 will make it obsolete (A7302-03;A1200-02). 

Microsoft nonetheless asserts that i4i had to show quantitative evidence 

regarding the parties market share. MSBr.76. But Microsoft cites no case 

mandating such evidence in all situations. In any event, i4i provided evidence of 

specific sales lost to Microsoft. A1676-77. Moreover, i4i submitted unchallenged 

testimony that Microsoft became a direct competitor in the area of custom-XML 

functionality, rendered i4i s products obsolete in 80% of the market, and 

relegated i4i to a niche market of the pharmaceutical industry, leaving it no hope of 

reentering the general market for custom-XML authoring software while Microsoft 

occupies the space. See supra at 24. When purchasers already have the infringing 

product (due to Word s 90% share of the word-processing market), they are 

understandably reluctant to purchase additional software with overlapping 

functionality. See supra at 24;A1765-66;A7091-97;A7099. 

79

Microsoft also argues that, because i4is financial condition improved 

around the time Word included the infringing custom-XML feature, i4i was not 

harmed. See MSBr.76. But as i4i showed, its licensing revenues did not increase; 

it had lost money due to investing in product development, and it reduced its losses 

around the time Microsoft began to infringe by cutting expenses. See supra at 24. 

Thus, this fact does not weigh against irreparable harm. 

Continuing, Microsoft argues that i4i had to show that customers purchased 

Word rather than i4i s products because of the infringing functionality. MSBr.76. 

Under the circumstances, however, i4i s inability to present such evidence did not 

mean that i4i was not damaged by Microsoft s sale of Word. As the district court 

found, once customers have Microsoft s XML features in Word, they are reluctant 

to purchase i4i s products. See supra at 24. In other words, as i4i has shown, 

customers may have purchased Word for other reasons, but they refuse to purchase 

i4i s XML technology because they already have it in Word. Thus, contrary to 

Microsoft s suggestion (MSBr.76), i4i did connect its purported harm to 

Microsoft s infringing product. 

Citing Roper Corp. v. Litton Systems, Inc., 757 F.2d 1266 (Fed. Cir. 1985), 

Microsoft next argues that i4i s loss of brand recognition requires specific 

evidence. MSBr.76-77. But Roper is inapposite. There, neither the patentee nor 

the accused infringer was practicing the patent and the Court had no reason to 

80

elieve that infringement would start in the future. Roper, 757 F.3d at 1273. Here, 

the district court had ample evidence on which to conclude that Microsoft s 

continued presence in the market forecloses i4i from maintaining or growing its 

brand and that Microsoft s activities contributed to i4i s loss of brand recognition. 

See supra at 24. 

Microsoft also argues that, whatever losses i4i might have proved, they all 

occurred in the past because i4i s current product is an add-on or plug-in to 

Word. MSBr.76-77. That i4i has been forced to offer an add-on or plug-in to 

remain competitive in light of Microsoft s infringement, however, does not mean 

that it is not continually harmed by that infringement. See supra at 21, 24. As the 

district court properly found: 

A53-54. 8 

[T]here was a void in the custom XML market that 

Microsoft filled with infringing products. As a result, i4i 

was unable to sell its products within the same market 

space. . . . Simply because i4i adapted to a market where 

Microsoft fills 80% of the market space does not mean 

that i4i has not suffered an irreparable injury. 

Microsoft similarly argues that i4i s product strategist, Thomas, testified that 

i4i is not currently in competition with Microsoft and thus an injunction is not 

8 Microsoft relies on this particular sentence (written in past tense) to support its 

position that any harm was in the past. But the district court s contrary intent is 

quite clear from the surrounding text and, moreover, the district court expressly 

found that i4i is injured by Microsoft s continuing infringement. A52 (emphasis 

added). 

81

appropriate. But Thomas was asked about the pharmaceutical space, where i4i s 

product A4L does not directly compete with Microsoft. See supra at 24. Notably, 

i4i s general product the platform on which A4L is built does directly compete 

with Microsoft. See supra at 24. 

Turning to the second eBay factor, Microsoft argues that the district court 

abused its discretion by placing the burden on Microsoft, not i4i. But the court did 

no such thing. While the court noted that Microsoft has not presented any 

evidence on alternative methods for compensating i4i in its discussion of the third 

eBay factor (balancing the hardships) (A56) it did not, as Microsoft asserts, 

improperly require Microsoft to demonstrate the adequacy of monetary relief 

(MSBr.78). 

In discussing the third factor (balance of equities), Microsoft persists in 

arguing that i4i does not compete against Word and complains that Microsoft 

would lose its significant investments. MSBr.78-79. Microsoft s argument wholly 

ignores that, by continuing to infringe the patent, Microsoft has caused i4i to lose 

its significant investments in the patented technology without any hope of 

regaining those investments. Moreover, as explained above, Microsoft s argument 

is irrelevant because i4i directly competes against the enjoined portion of Word. 

See A56. 

82

Finally, Microsoft s reliance on Justice Kennedy s concurrence in eBay 

and particularly his statement that [w]hen the patented invention is but a small 

component of the product the companies seek to produce and the threat of an 

injunction is employed simply for undue leverage in negotiations, legal damages 

may well be sufficient is misplaced. Justice Kennedy s comments were in the 

context of firms that use patents primarily for obtaining licensing fees (547 U.S. 

at 396-97 (Kennedy, J., concurring)), which i4i indisputably does not. Moreover, 

the injunction here does not prevent Microsoft from producing and selling the 

noninfringing portions of Word, only the separable infringing portion. A3-4. 

Finally, while Microsoft has never asserted that it cannot comply with the 

injunction, only that it would be difficult or expensive (MSBr.78), that is the cost 

of infringing. 

Addressing the final factor, public interest, Microsoft argues that in conflict 

with well-established precedent, the district court focused its public-interest 

inquiry exclusively on public health and welfare considerations (MSBr.79;A56- 

57), but fails to raise anything beyond repeating its well-worn positions on 

invalidity and the nascent reexamination. The simple fact is that Microsoft has 

never shown any public interest in its ongoing infringement and cannot. Courts 

have looked to health and safety as markers of compelling public interest and the 

case law does not suggest any error in the district court s analysis here. 

83

In sum, the district court weighed each of the eBay factors and correctly 

concluded that i4i should be granted the narrow injunction it sought. 

VI. CONCLUSION 

For the reasons stated above, i4i respectfully asks the Court to affirm all 

aspects of the district court's judgment. If the Court modifies the district court's 

claim construction in a way that would affect the jury's verdict, the Court should 

remand for a new trial. 

Dated: September 8, 2009 

Douglas A. Cawley 

Jeffrey A. Carter 

McKoOL SMITH, P.C. 

300 Crescent Court, Ste. 1500 

Dallas, TX 75201 

(214) 978-4000 

T. Gordon White 

McKooL SMITH, P.C. 

330 West 6th St., Ste. 1700 


(512) 692-8700 

84 

Respectfully submitted, 

Kara F. Stoll 

Jason W. Melvin 

FINNEGAN, HENDERSON, F ARABOW, 

GARRETT & DUNNER, LLP 



(202) 408-4000 


FINNEGAN, HENDERSON, F ARABOW, 


3300 Hillview Avenue 

Palo Alto, CA 94304 

(650) 644-6644 

Attorneysfor Plaintiffs-Appellees 

i4i Limited Partnership and 

Infrastructures for Information Inc.

CERTIFICATE OF COMPLIANCE 

I certify that the foregoing BRIEF FOR i4i LIMITED PARTNERSHIP and 

INFRASTRUCTURES FOR INFORMATION INC. contains 17,989 words as 

measured by the word processing software used to prepare this brief. 

Dated: September 8, 2009 Respectfully submitted, 





(202) 408-4000

CERTIFICATE OF SERVICE 

I hereby certify that on this 8th day of September 2009, two (2) true and 

correct copies of the foregoing BRIEF FOR i4i LIMITED PARTNERSHIP and 

INFRASTRUCTURES FOR INFORMATION INC. were served by e-mail and 

overnight courier to: 


matthew.powers@weil.com 


201 Redwood Shores Parkway 

Redwood City, CA 94065 

(602) 802-3200 

Fax: (605) 802-3100 

John Thornburgh 

thornburgh@fr.com 

FISH & RICHARDSON P.C. 

12390 El Camino Real 

San Diego, CA 92130 

(858) 678-5080 

Matthew D. McGill 

mmcgill@gibsondunn.com 

GIBSON, DUNN & CRUTCHER LLP 

1050 Connecticut Avenue, N.W. 


(202) 887-3783 

Fax: (202) 530-4225 

_______________________________

i4i LIMITED PARTNERSHIP and 

INFRASTRUCTURES FOR 

INFORMATION, INC., 

vs. 

Case 6:07-cv-00113-LED Document 412 Filed 08/11/2009 Page 1 of 65 

Plaintiffs 


Defendant 

IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF TEXAS 

TYLER DIVISION 

1 

§ 

§ 

§ 

§ 

§ CASE NO. 6:07CV113 

§ PATENT CASE 

§ 

§ 

§ 

§ 

§ 

MEMORANDUM OPINION AND ORDER 

Before the Court are Microsoft’s motion for judgment as a matter of law (“JMOL”) or motion 

for new trial (“MNT”) regarding willful infringement (Docket No. 345); i4i, Inc. and i4i, LP’s 

(collectively “i4i”) motion for enhanced damages and attorneys’ fees (Docket No. 346); Microsoft’s 

motion for JMOL and MNT regarding indirect infringement (Docket No. 347); Microsoft’s JMOL 

and MNT regarding noninfringment (Docket No. 348); i4i’s motion for a permanent injunction 

(Docket Nos. 349 & 364); i4i’s motion for post-verdict damages, prejudgment interest, and post- 

judgment interest (Docket No. 350); Microsoft’s MNT or remittitur regarding damages (Docket No. 

351); Microsoft’s MNT regarding invalidity (Docket No. 353); Microsoft’s JMOL and MNT 

regarding anticipation and obviousness in light of Rita and DeRose (Docket No. 356); Microsoft’s 

JMOL and MNT regarding anticipation and obviousness in light of S4 (Docket No. 359); 

Microsoft’s motion to stay injunctive relief (Docket No. 370); and i4i’s motion to strike (Docket No. 

389). For the reasons stated below, i4i’s motion for enhanced damages and attorneys’ fees (Docket 

No. 346) is GRANTED in part, i4i’s motion for permanent injunction (Docket Nos. 349 & 364) is


GRANTED, i4i’s motion for post verdict damages, prejudgment interest, and post-judgment interest 

(Docket No. 350) is GRANTED, and all other motions are DENIED. Furthermore, this opinion sets 

forth the Court’s findings of fact and conclusions of law regarding Microsoft’s equitable defenses 

of laches and inequitable conduct. 

BACKGROUND 

The technology in this case focuses on a particular type of electronic documents. Generally, 

a “document” as manifested in a computer program has two distinct parts: the content (i.e. the text 

that the user has created in the document) and the structure (the encoding that allows the computer 

to recognize the meaning of the text). A type of structural information within an electronic 

document sometimes comes in the form of “metacodes.” Standardized computer languages were 

developed that utilized metacodes to allow a computer to understand the meaning behind certain text 

that a user placed in a document. An early example of these languages is the Standard Generalized 

Markup Language (“SGML”). Later, a markup language was developed called the Extensible 

Markup Language (“XML”). Asserted U.S. Patent No. 5,787,449 (the “‘449 patent”) is entitled 

“Method and System for Manipulating the Architecture and the Content of a Document Separately 

from Each Other.” The ‘449 patented invention created a reliable method of processing and storing 

content and metacodes separately and distinctly. The data structure primarily responsible for this 

separation is called a “metacode map.” According to the patent, the “metacode map” allows a 

computer to manipulate the structure of a document without reference to the content. 

Microsoft is the developer of popular word processing and editing software known as Word 

(“WORD”). Over the years, WORD has had many versions with increasing functionality. In 2003, 

Microsoft introduced a version of WORD with XML editing capabilities. This functionality 

2


1 

continued in the latest version of WORD, “Word 2007.” On March 8, 2007 i4i LP filed this action 

alleging that Microsoft infringed the ‘449 patent. A jury trial commenced on May 11, 2009. At trial, 

i4i contended that Microsoft’s use of certain WORD 2003 and all of WORD 2007 products for 

processing XML documents with custom XML elements infringed claims 14, 18, and 20 of the ‘449 

2 

patent. i4i further argued that Microsoft’s infringement of the patent was willful. Microsoft 

claimed that its WORD products did not infringe the patent and that the patent was invalid. 

Following a seven day trial, the jury returned a verdict finding the patent valid and infringed and 

awarding i4i $200,000,000 in damages. The Court also conducted a bench trial regarding 

Microsoft’s additional equitable defenses of laches and inequitable conduct. 

JMOL Standard 

1 

i4i Inc. was later joined as a co-plaintiff. For ease of reference, both i4i entities will be referred to 

collectively as "i4i." 

2 

MICROSOFT’S MOTIONS FOR JMOL & NEW TRIAL 

“The grant or denial of a motion for judgment as a matter of law is a procedural issue not 

unique to patent law, reviewed under the law of the regional circuit in which the appeal from the 

district court would usually lie.” Summit Tech. Inc. v. Nidek Co., 363 F.3d 1219, 1223 (Fed. Cir. 

2004). In the Fifth Circuit, JMOL may not be granted unless “there is no legally sufficient 

evidentiary basis for a reasonable jury to find as the jury did.” Hiltgen v. Sumrall, 47 F.3d 695, 700 

(5th Cir.1995) (internal quotation marks omitted). A court reviews all the evidence in the record and 

must draw all reasonable inferences in favor of the nonmoving party, however, a court may not make 

credibility determinations or weigh the evidence, as those are solely functions of the jury. See 

All of the asserted claims at trial were method claims. 

3


Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150-51 (2000). 

New Trial Standard 

Under Rule 59(a) of the Federal Rules of Civil Procedure, a new trial can be granted to any 

party to a jury trial on any or all issues “for any reason for which new trials have heretofore been 

granted in actions at law in courts of the United States.” “A new trial may be granted, for example, 

if the district court finds the verdict is against the weight of the evidence, the damages awarded are 

excessive, the trial was unfair, or prejudicial error was committed in its course.” Smith v. 

Transworld Drilling Co., 773 F.2d 610, 612-13 (5th Cir. 1985). 

MICROSOFT’S JMOL & MNT - NO DIRECT INFRINGEMENT 

Microsoft first moves for JMOL arguing that no reasonable juror could find that its accused 

WORD products infringed the ‘449 patent literally or by the doctrine of equivalents. Microsoft’s 

motion presents three general arguments. 

First, Microsoft argues that i4i presented no evidence that the accused WORD products 

created “a data structure” as required by the Court’s construction of the claim term “metacode map.” 

The Court construed and instructed the jury that “metacode map” and “map of metacodes” in the 

‘449 patent meant “a data structure that contains a plurality of metacodes and their addresses of use 

corresponding to mapped content.” Claim Construction Opinion, Docket No. 111 at 11. The Court 

further construed “mapped content” as meaning “the content of a document corresponding to a 

metacode map.” Id. 

During trial Dr. Rhyne, one of i4i’s technical experts, explained that the meaning of “a data 

structure” was “a physical or logical relationship among data elements designed to support specific 

data manipulation functions.” TT 5/12/09 p.m. at 154:14-16 (citing to the IEEE dictionary). Dr. 

4

Rhyne also provided extensive testimony over the physical and logical interrelationships present in 

the various “data structures” comprising WORD’s XML metacode and content mapping. Id. at 

101:21-106:13; Plaintiffs’ Illustrative 1. Furthermore, another of i4i’s technical experts, Dr. Martin, 

established that various elements within the accused WORD products constituted a single data 

structure because of their physical and logical interrelationships. See TT 5/13/09 p.m. at 27:22- 

30:11. 


Microsoft’s principal argument is that the “data structure” that Dr. Rhyne found in WORD 

could be broken down into smaller logical “data structures.” See TT 5/13/09 a.m. at 73:2-10. 

Microsoft argues that since there could be multiple “data structures” found within WORD’s source 

code, the jury could not find a single “data structure” that “contained a plurality of metacodes and 

their addresses of use.” However, Microsoft’s technical expert conceded during trial that Microsoft 

had urged at the Court’s claim construction hearing that a “data structure” was “a collection of pieces 

of data that are organized in a particular way . . . [and] can be stored in numerous different places.” 

TT 5/19/09 a.m. at 23:17-24:25. Further, Microsoft’s motion does not identify or request any 

alternative definition of “data structure.” Microsoft even concedes that the multiple “data structures” 

that it identified during Dr. Rhyne’s cross examination could be broken down even further. Id. 

Though Microsoft makes broad statements suggesting that the “view of ‘data structure’ urged 

by Dr. Rhyne is inconsistent with the teachings of the patent,” its argument reduces to a mere 

disagreement with the jury verdict. See Microsoft’s Motion, Docket No. 348 at 12. The jury was 

called upon to decide whether WORD met the Court’s definition of “metacode map.” Without 

asserting that i4i exceeded the scope of the Court’s definition, or suggesting that the Court’s 

definition is erroneous, Microsoft now contends, after the verdict, that a “metacode map” requires 

5


the logically smallest subdivision of a data structure to contain “a plurality of metacodes and their 

addresses of use.” “[L]itigants waive their right to present new claim construction disputes if they 

are raised for the first time after trial.” Conoco, Inc. v. Energy & Envtl. Int’l, L.C., 460 F.3d 1349, 

1359 (Fed. Cir. 2006). As Microsoft has never suggested a definition of “metacode map” that limits 

a “data structure” to its logically smallest subdivision, its argument is waived. Furthermore, as 

recounted above, i4i presented legally sufficient evidence for the jury to conclude that the WORD 

products contained a “data structure” within the Court’s definition of “metacode map.” 

In the alternative to literal infringement, i4i alleged that the accused WORD products met 

the “metacode map” claim limitation by the doctrine of equivalents. Essentially, i4i argued that even 

supposing the jury viewed the “data structure” within the WORD products to be several “data 

structures,” the products still infringed by equivalence. Microsoft additionally argues that i4i failed 

to present legally sufficient evidence of infringement by the doctrine of equivalents because Dr. 

3 

Rhyne’s testimony was incredible and conclusory. After a review of the record, i4i clearly presented 

sufficient testimony based on credible expert analysis that the accused WORD products contained 

a “metacode map” equivalent to that described in the asserted claims of the ‘449 patent. See, e.g., 

5/12/09 p.m. 161:7-11 (explaining the doctrine of equivalents standard), 161:1 (explaining that 

differences between multiple data structures and “a data structure” are insubstantial), 161:15-162:9 

(explaining that several data structures with logical relationships among them are considered a single 

data structure to those skilled in the art). Thus, Microsoft’s arguments regarding the “metacode 

map” claim limitation are rejected. 

3 

Of course, since i4i presented legally sufficient evidence of literal infringement, consistent with the 

Court’s construction of “metacode map,” the jury did not need to base its verdict on the doctrine of equivalents. 

However, the Court addresses this portion of Microsoft’s JMOL motion for the sake of completeness. 

6


Second, Microsoft contends that i4i presented legally insufficient evidence that the accused 

WORD products contained “metacodes” as required by the claims. The Court defined “metacode” 

as “an individual instruction which controls the interpretation of the content of the data.” As 

background, it is undisputed that markup languages (such as XML) generally use “tags” to denote 

the use of a metacode. TT 5/13/09 a.m. at 44-48. These “tags” contain a code that describes the 

content (such as “memberid” to describe to the computer that the content between the tags is a 

“member ID number”). The “tags” also contain characters (such as “”) called delimiters. 

Id. at 47:8-11. These characters are generally used to indicate to the computer that content has ended 

and what follows is a description of the content. Id. For example, a “tag” along with content would 

generally take the form of “12345.” 

It is undisputed that the codes in the accused WORD products do not contain delimiters. 

Again, Microsoft argues, after the verdict, that the Court’s claim construction requires that 

“metacodes” contain delimiters. This argument is a direct extension of the claim construction 

position that Microsoft raised during the Court’s claim construction hearing and was expressly 

rejected. Compare Microsoft’s Motion, Docket No. 348 at 14 (arguing that the definition of 

metacodes should include the phrase “i.e., it differentiates content”) with Claim Construction 

Opinion, Docket No. 111 at 5 (expressly rejecting the addition of the phrase “i.e., it differentiates 

content” as unnecessarily limiting the claims). Despite this express rejection, Microsoft vigorously 

cross-examined Dr. Rhyne concerning the absence of delimiters in Microsoft’s accused products. 

Again during closing arguments Microsoft essentially argued that the Court’s construction required 

delimiters. See TT 5/13/09 a.m. at 44-48; TT 5/20/09 at 52-58. For the same reasons provided for 

in the Court’s claim construction opinion, the definition of “metacode” is simply “an individual 

7


instruction which controls the interpretation of content.” 

Given the Court’s construction of “metacode,” i4i clearly presented legally sufficient 

evidence to show that the “codes” contained within the accused WORD products met the claim 

limitation. Dr. Rhyne explained, consistent with the Court’s definition of “metacodes,” that a “tag” 

was not necessarily a “metacode” as defined in the ‘449 patent. See, e.g., TT 5/13/09 a.m. at 46:2-6, 

47:2-4. He further explained why delimiters were not necessarily included within the Court’s 

definition and why the accused WORD products fit within the claim limitation. See, e.g., TT 

5/13/09 a.m. at 47:4-7; TT 5/12/09 p.m. at 149:8-11. Furthermore, any argument that “metacode” 

should have been defined to expressly include delimiters has never been specifically raised with the 

4 

Court and is therefore waived. As a result, Microsoft’s arguments regarding the “metacode” claim 

limitation are rejected. 

Finally, Microsoft argues that a new trial is warranted because the Court incorrectly construed 

several terms in its claim construction opinion including “distinct map storage means,” “mapped 

content storage means,” and “mapped content storage.” The Court has thoroughly explained the 

rationale behind its constructions of those terms and has previously rejected Microsoft’s proposed 

definitions. See Claim Construction Opinion, Docket No. 111. Microsoft’s arguments are again 

rejected for the reasons expressed in the Court’s claim construction opinion. 

In accordance with the aforementioned reasoning, Microsoft’s motion for JMOL and new 

trial regarding direct infringement and infringement by the doctrine of equivalents of claims 14, 18, 

and 20 of the ‘449 patent is denied. 

4 

In fact, regarding this very issue, Microsoft was offered the opportunity to revisit the Court’s claim 

construction of “metacodes” and declined the invitation. TT 5/18/09 a.m. at 27:13-15 (“We assured the Court that 

we would not be rearguing claim construction and that is exactly what we are not doing.”). 

8


MICROSOFT’S JMOL & MNT – NO INDIRECT INFRINGEMENT 

Microsoft next moves for JMOL and a new trial with regard to i4i’s claims of contributory 

and induced infringement. Infringement is a question of fact that is reviewed for substantial 

evidence when tried to a jury. Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1332 (Fed. Cir. 

2008). A cause of action for contributory infringement flows from 35 U.S.C. § 271(c). That section 

provides: 

Whoever offers to sell or sells within the United States or imports into the United 

States a component of a patented machine, manufacture, combination or 

composition, or a material or apparatus for use in practicing a patented process, 

constituting a material part of the invention, knowing the same to be especially made 

or especially adapted for use in an infringement of such patent, and not a staple 

article or commodity of commerce suitable for substantial noninfringing use, shall 

be liable as a contributory infringer. 

35 U.S.C. § 271(c). 

Induced infringement is a separate cause of action from contributory infringement. “In order 

to prevail on an inducement claim, the patentee must establish first that there has been direct 

infringement, and second that the alleged infringer knowingly induced infringement and possessed 

specific intent to encourage another's infringement.” ACCO Brands, Inc. v. ABA Locks Mfr. Co., 501 

F.3d 1307, 1312 (Fed. Cir. 2007) (internal quotation marks omitted). “[I]nducement requires 

evidence of culpable conduct, directed to encouraging another's infringement, not merely that the 

inducer had knowledge of the direct infringer's activities.” Id. at 1306. Furthermore, “[t]he plaintiff 

has the burden of showing that the alleged infringer's actions induced infringing acts and that he 

knew or should have known his actions would induce actual infringements.” DSU Med. Corp. v. 

JMS Co., 471 F.3d 1293 (Fed. Cir. 2006) (quoting Manville Sales Corp. v. Paramount Sys., Inc., 917 

F.2d 544, 553 (Fed. Cir. 1990)). 

9


Both forms of indirect infringement require the plaintiff to prove corresponding acts of direct 

infringement. See DSU Med. Corp., 471 F.3d at 1303. Importantly however, a patentee may prove 

both indirect infringement and the corresponding direct infringement by circumstantial evidence. 

See Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1219 (Fed. Cir. 2006). “There is no 

requirement that direct evidence be introduced, nor is a jury's preference for circumstantial evidence 

over direct evidence unreasonable per se.” Id. Moreover, “[t]he drawing of inferences, particularly 

in respect of an intent-implicating question . . . is peculiarly within the province of the fact finder that 

observed the witnesses.” Rolls-Royce Ltd. v. GTE Valeron Corp., 800 F.2d 1101, 1110 (Fed. Cir.1 

986); see also Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005) 

(declining to disturb jury's verdict because intent to induce infringement “is a factual determination 

particularly within the province of the trier of fact”). 

Regarding contributory infringement, Microsoft presents three arguments wherein it asserts 

that i4i failed to present sufficient evidence on certain elements of contributory infringement. First, 

it asserts that i4i failed to produce legally sufficient evidence that Microsoft knew that WORD was 

both “patented and infringing.” See Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 

476, 488 (1964). The Federal Circuit has commented that the required showing of mental state for 

indirect infringement is “minimal.” See DSU Med. Corp., 471 F.3d at 1303. Microsoft’s argument 

seems to imply that i4i was required to show direct evidence that its infringing product was both 

patented and infringing. However, as noted above, legally sufficient evidence can be composed of 

either direct or circumstantial evidence. i4i presented evidence that Microsoft was provided with 

an explanation of i4i’s patented technology along with the patent number starting in April 2001 and 

continuing through 2003. See, e.g., TT 5/12/09 a.m. at 79:20-81:22, 79:5-9, 82:4-11,138:9-140:22; 

10


PX 13; TT 5/15/09 p.m. at 5:16-8:1; TT 5/12/09 a.m. at 8:7-9:22; PX 19; PX 39; PX 16; PX 23; TT 

5/13/09 a.m. at 16:5-18:18; PX 49. i4i even presented an internal Microsoft email from January of 

2003 containing i4i’s product name, the patent number, and a statement from a Microsoft employee 

that i4i’s technology would be made “obsolete” by the accused WORD product (which admittedly 

added XML functionality to the previous version of Microsoft’s WORD product). PX 49. Viewing 

the evidence in the light most favorable to the jury and drawing all inferences in favor of i4i, there 

is legally sufficient evidence to support the conclusion that Microsoft knew that its WORD products 

containing XML functionality would infringe the ‘449 patent if used by its customers. 

Second, Microsoft contends that i4i failed to present legally sufficient evidence that WORD’s 

5 

XML feature did not have a substantial non-infringing use. At trial, the parties’ experts agreed that 

the XML feature in the accused WORD products could be used in three non-infringing ways: first, 

opening a file containing custom XML elements in a “.doc” format (the “binary format” use); 

second, opening a “.xml” file containing custom XML elements but no content (the “no content” 

use); finally, creating a blank document, associating a schema definition file, adding custom XML 

elements using the XML structure pane of WORD’s graphical user interface (“GUI”), adding content 

5 

A portion of Microsoft’s briefing is devoted to an analysis of Ricoh Co., Ltd. v. Quanta Computer Inc., 

550 F.3d 1325 (Fed. Cir. 2008) where the Federal Circuit addressed the issue of whether the “substantial noninfringing 

use” analysis focused on an entire product or an accused separable feature. The court concluded that an 

accused infringer “should not be permitted to escape liability as a contributory infringer merely by embedding [the 

infringing product] in a larger product with some additional, separable feature . . . .” Id. at 1337. Microsoft attempts 

to distinguish Ricoh by arguing that products must be “physically separable,” as opposed to software containing 

many separate features as in the case of WORD, for the analysis to apply. However, despite Microsoft’s arguments, 

the holding in Ricoh is highly relevant to the present case considering that hundreds of separate features in WORD 

existed before the infringing XML feature was added and i4i presented evidence of stand alone XML editors 

available in the marketplace. Thus, i4i has sufficiently made any threshold showing of “separability” that may be 

required by the Ricoh decision and “substantial non-infringing use” will therefore be analyzed within the context of 

the accused feature and not the product as a whole. Indeed, Microsoft’s briefing seems to concede this conclusion 

considering that the majority of its brief focuses on evidence of “substantial non-infringing uses” within WORD’s 

XML feature. See Microsoft’s Response, Docket No. 347 at 14-17. 

11


using WORD’s GUI, then saving the file in the “.xml,” “.doc,” “.docx,” “.rtf,” “.html,” or “.docm” 

file formats without reopening the document (the “mere creation” use). See TT 5/13/09 a.m. at 29, 

117-123. The parties vigorously disputed whether any of these uses was “a substantial non- 

infringing use.” Microsoft argues that i4i’s evidence only amounts to an explanation of why the 

accused uses were “substantial” and that i4i presented no evidence that the uses mentioned above 

are not “substantial non-infringing uses.” 

A “substantial” use of an accused feature is one that is not occasional, farfetched, impractical, 

experimental, or hypothetical. See, e.g., Hoffmann-La Roche, Inc. v. Promega Corp., 33 U.S.P.Q. 

2d 1641, 1648 (N.D. Cal.1994) (“Whether a use is ‘substantial’ or not depends on how likely and 

often the use will occur. Thus, occasional aberrant use of a product does not make that use 

‘substantial.’ Similarly, inefficient and uneconomical uses are less likely to be deemed 

‘substantial.’”). i4i’s infringement expert, Dr. Rhyne, testified that the “binary format” use involves 

saving an XML document in a proprietary Microsoft format as opposed to a non-proprietary format, 

such as “.xml,” readable by other applications. TT 5/13/09 a.m. at 30:24-31:3, 140:6-15. In Dr. 

Rhyne’s opinion, the essential advantages of XML (i.e. the ability of other applications to search 

documents identifying the “meaning” behind content) were subverted by saving the documents in 

a format readable only by Microsoft products. See id.; TT 5/13/09 a.m. at 28:11-24. Thus, he 

opined, that such a use was impractical given the purpose of custom XML. 

Likewise, Dr. Rhyne explained that the “no content” use involved creating a form using 

custom XML tags, but never using that form by adding content. TT 5/13/09 a.m. at 140:21-141:8. 

He testified that such a use would not be substantial considering that XML documents (especially 

forms) are designed to enable a user to add content to the document. See id. at 141:4-9, 29:4-9, 34:4- 

12


6, 121:9-11. Finally, Dr. Rhyne opined that the mere creation use involved creating an XML 

document and never reopening it. Id. at 33:16-21. In his opinion, a WORD document is designed 

to be opened and saved repeatedly. Id. at 33:22-34:1. Thus, a use where a document is merely 

created and never reopened was insubstantial. Id. at 33:16-21. 

Dr. Rhyne is not required to opine over the number of people actually using WORD in non- 

infringing ways in order to prove “insubstantiality.” Rather, Dr. Rhyne’s testimony focusing on the 

impracticality of using custom XML given the purpose of the invention is both relevant and 

probative to “substantiality.” Thus, while Microsoft points to contradictory testimony by its expert 

explaining that these uses are “substantial,” the jury was presented with legally sufficient evidence 

to conclude that Microsoft’s proposed non-infringing uses were insubstantial. 

Finally, Microsoft argues that no reasonable juror could find that Microsoft “sold” or “offered 

for sale” any product within the scope of § 271(c). Microsoft’s essentially legal argument is that no 

software could form the basis of contributory infringement because i4i only asserted “process” 

claims during trial. However, Microsoft failed to raise this argument before the case was submitted 

to the jury. None of Microsoft’s other objections or requests prior to submission of this case to the 

jury addressed the issue of whether i4i was required prove the sale of something tangible used in the 

infringing processes. Furthermore, Microsoft did not object to the Court’s jury instructions on these 

grounds or request a particular instruction addressing this very specific issue. See Joint Proposed 

Instructions, Docket No. 320-2 at 30-32. As a result, Microsoft’s JMOL on this issue is waived. See 

Flowers v. S. Reg’l Physician Servs. Inc., 247 F.3d 229, 238 (5th Cir. 2001) (“If a party fails to move 

for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) on an issue at the 

conclusion of all the evidence, that party waives both its right to file a renewed post-verdict Rule 

13


50(b) motion and also its right to challenge the sufficiency of the evidence on that issue on appeal.”). 

Regarding i4i’s claims of induced infringement, Microsoft again asserts that i4i presented 

insufficient evidence to show that Microsoft had the specific intent to induce infringement. As was 

the case for contributory infringement, circumstantial evidence that Microsoft knew of the patent 

number, in connection with an in-depth knowledge of i4i’s products, along with statements that 

WORD would render i4i’s products “obsolete,” provides a legally sufficient basis for the jury to 

conclude that the intent requirement for inducement was satisfied. Additionally, Microsoft asserts 

that a survey conducted by one of i4i’s damages experts (the “Wecker survey”) was an insufficient 

evidentiary basis for proving the “direct infringement” elements of the indirect infringement causes 

of action. As explained elsewhere in this opinion, the Wecker survey passes the legally required 

threshold level of reliability and was qualified to be relied upon by the jury. 

Microsoft also moves for a new trial based on alleged errors in the jury instructions for both 

contributory and induced infringement. Microsoft argues that the Court’s instruction that Microsoft 

could be held liable for induced infringement if it “intended to cause acts that constitute 

infringement” was erroneous. Microsoft’s proposed instruction required a specific intent to cause 

infringement. However, the very next sentence in the Court’s charge instructs the jury that they 

“must find specifically that the inducer intended to cause the acts that constitute the direct 

infringement and must have known or should have known that its action would cause the direct 

infringement.” Court’s Charge, Docket No. 323 at 12. The instruction specifically tracked the 

language in DSU Medical Corp. v. JMS Company and properly instructed the jury regarding the 

mental state requirements of inducement. 471 F.3d 1293 (Fed. Cir. 2006). Microsoft’s argument 

is overruled. 

14


Microsoft finally argues that the Court improperly instructed the jury regarding contributory 

infringement. It argues that the Court improperly instructed the jury that Microsoft could be found 

liable for contributory infringement if the jury found that it sold “a material component for use in 

practicing the patented method.” Court’s Charge, Docket No. 323 at 13. Microsoft submitted an 

instruction that required a “material or apparatus” to be sold, rather than a software component. This 

argument has been foreclosed by the Federal Circuit’s Ricoh decision. 550 F.3d at 1340 (reversing 

district court’s granting of summary judgment because there was a “material issue of fact [over] 

whether [the defendant’s] optical disc drives contain hardware or software components that have no 

substantial noninfringing use other than to practice [the plaintiff’s] claimed methods”). The Court’s 

instruction was correct. 

Accordingly, as all of Microsoft’s arguments have been rejected, its motion is denied. 

MICROSOFT’S JMOL & MNT - NO WILLFULNESS 

Microsoft next moves for JMOL on the jury finding that it willfully infringed the '978 patent. 

To prevail on a charge of willful infringement, the patentee must show the accused infringer acted 

with objective recklessness. In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). First, 

the patentee must show by clear and convincing evidence that the infringer acted despite an 

objectively high likelihood that its actions infringed a valid patent. Id. The accused infringer's state 

of mind is irrelevant to this objective inquiry. Id. If the patentee meets this threshold objective 

standard, the patentee must further demonstrate that the accused infringer knew or should have 

known of this objectively high risk. Id. Whether infringement is willful is a question of fact and 

reviewed for substantial evidence. Metabolite Labs., Inc. v. Labs. Corp. of Am. Holdings, 370 F.3d 

1354, 1359 (Fed. Cir. 2004). 

15


Initially, Microsoft’s arguments are premised on an overly broad reading of Seagate. It 

argues that the objective prong of the willfulness analysis is met if and only if a defendant failed to 

present valid defenses during the infringement proceedings. For instance, Microsoft asserts that the 

very fact that pretrial summary judgment was granted on certain asserted claims of the ‘449 patent, 

i4i voluntarily dismissed other claims, and Microsoft asserted defenses at trial (including its 

equitable defenses) bars it entirely from willfulness liability. 

In support of this expansive view of the “objective” prong of willfulness, Microsoft heavily 

relies on Black & Decker, Inc. v. Robert Bosch Tool Corp., 260 Fed. Appx. 284 (Fed. Cir. 2008). 

First and foremost, the issue of whether all defenses presented throughout an infringement 

proceeding could foreclose a willfulness finding as a matter of law was not before the court in Black 

& Decker. See id. at 291 (“In light of our disposition of the claim construction issue on appeal, and 

consequent vacating of the infringement verdict, the issue of willful infringement becomes moot.”). 

Second, the case is distinguishable. There, the jury found several asserted claims invalid and the 

Federal Circuit reversed the infringement verdict on the remaining claims. See id. Here, the sum 

of the jury’s findings along with the size of the verdict indicate that Microsoft’s arguments regarding 

the asserted claims at trial were rejected wholesale. 

Finally, and most disturbingly, Microsoft’s arguments invite the Court to adopt a view of 

willful infringement that would allow an accused infringer to stay willfully ignorant despite a high 

likelihood that its actions infringe a valid patent. Such a view would allow an infringer to escape 

a finding of willfulness regardless of its conduct at the time the infringement began as long as it 

presented many defenses after a formal action was filed. Such a view is inconsistent with both 

Seagate and generally accepted legal principals regarding “objective” legal analysis. 

16

Traditionally and overwhelmingly, “objective” tests focus on the facts and circumstances 

available to an actor at the time that the action under scrutiny was taken. See e.g., Maryland v. 

Macon, 472 U.S. 463, 470 (1985) (“Whether a Fourth Amendment violation has occurred “turns on 

an objective assessment of the officer's actions in light of the facts and circumstances confronting 

him at the time . . . .”); Carmichael v. United States, 298 F.3d 1367, 1372 (Fed. Cir. 2002) (“In 

applying this test, duress or coercion is measured by an objective evaluation of all the facts and 

circumstances.”); Grawey v. Drury, 567 F.3d 302, 310 (6th Cir. 2009) (“In determining whether an 

excessive force constitutional violation occurred, we must look at the objective reasonableness of 

the defendant's conduct, which depends on the facts and circumstances of each case viewed from the 

perspective of a reasonable officer on the scene and not with 20/20 hindsight.”). 

The Federal Circuit’s discussion in Seagate bolsters this view of “objective” analysis. There, 

the court distinguished a “reckless” standard for willfulness with one that would require only 

“negligence.” See In re Seagate, 497 F.3d at 1370. To that end, the Federal Circuit overruled the 

standard announced in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 

(Fed. Cir. 1983), requiring a willfulness finding when an accused infringer failed to investigate a 

patent owner’s rights prior to acting. The new “recklessness” standard, repeated above, adopted by 

the Seagate court was taken from a general accepted meaning of the term in civil law. See In re 

Seagate, 497 F.3d at 1370. Thus, the “objective” prong of the Seagate standard focuses on an 

“objective” view of the facts and circumstances surrounding an accused infringer at the time that it 

acts. 


As a consequence, the number of creative defenses that Microsoft is able to muster in an 

infringement action after years of litigation and substantial discovery is irrelevant to the objective 

17


prong of the Seagate analysis. Rather, the correct analysis focuses on whether, given the facts and 

circumstances prior to Microsoft’s infringing actions, a reasonable person would have appreciated 

a high likelihood that acting would infringe a valid patent. See id.; Restatement (Second) of Torts 

§ 500, comment b (1965) (“Conduct cannot be in reckless disregard of the safety of others unless the 

act or omission is itself intended, notwithstanding that the actor knows of facts which would lead any 

reasonable man to realize the extreme risk to which it subjects the safety of others.”) (emphasis 

added). The subjective prong of the analysis then focuses on whether Microsoft knew or should have 

known of that likelihood. 

Given these principles, Microsoft’s arguments must be rejected. First, Microsoft argues that 

the facts that 1) this Court granted summary judgment invalidating certain claims of the ‘449 patent; 

2) it asserted defenses to the remaining claims of the ‘449 patent; and 3) i4i voluntarily dismissed 

certain accused products before trial, entitles it to JMOL regarding willfulness. As Microsoft does 

not argue (and did not argue to the jury) that any of these “defenses” would have been apparent and 

considered by a reasonable person in Microsoft’s position prior to its infringing activity, these 

arguments are irrelevant and inappropriate. Furthermore, the pretrial summary judgment and i4i’s 

voluntary dismissal of accused products are irrelevant to the remaining claims that the jury found 

were valid and the remaining products that the jury found were willfully infringing. Additionally, 

Microsoft’s remaining defenses of invalidity were rejected by the jury and i4i presented sufficient 

evidence to support its infringement and validity positions. 

Second, Microsoft argues that i4i presented insufficient evidence under the subjective prong 

of Seagate. Microsoft effectively argues that anything short of a “cease-and-desist” letter would be 

ineffective to put it on notice of an objective risk of infringement. In fact, i4i presented sufficient 

18


evidence, both direct and circumstantial, that Microsoft was aware of the likelihood that its activities 

were infringing. See, e.g., 5/12/09 a.m. at 76-80, 130-40; PX 19; PX 20; PX 13; PX 39; PX 103; PX 

49; PX 100. 

Finally, Microsoft asserts three bases for which a new trial should be granted. First, it argues 

that the Court erred in rejecting a “curative instruction” regarding wilfulness. The instruction that 

Microsoft proposed was that “[n]otice of another’s ownership of a patent does not give rise to a duty 

to investigate that patent.” Docket No. 320-2 at p. 37. Microsoft analogizes the Court’s rejection 

of this instruction with the improper instruction given in Voda v. Cordis Corp., 536 F.3d 1311, 1327- 

28 (Fed. Cir. 2008). There, the Federal Circuit rejected an argument that the district court’s 

instruction applying an affirmative duty to investigate to the willfulness analysis was “harmless.” 

Id. Here, no affirmative duty of care was insinuated in the Court’s willfulness instruction. The 

instruction given tracked the language of Seagate, and Microsoft does not point to any language in 

the Court’s instruction that was improper. Microsoft’s proposed instruction was cumulative of the 

specific language defining the willfulness standard in Seagate and was properly rejected. 

Microsoft also argues it is entitled to a new trial because the Court improperly excluded 

evidence relevant only to its equitable defenses from the jury. The Court took no such action. In 

ruling on Microsoft’s motion in limine regarding this issue, the Court instructed Microsoft that the 

relevance of its evidence on equitable issues would be determined on a case-by-case basis. Pretrial 

Hearing Transcript 5/7/09 at 16-17. In addition, as i4i points out, Microsoft actually presented 

evidence regarding its equitable defenses during trial. See, e.g., TT 5/15/09 p.m. at 39, 43-44; 

5/18/09 p.m. at 59-74. Microsoft never sought to introduce other evidence regarding its equitable 

defenses during trial and no offer of proof in this regard was ever made. As the Court did not 

19


exclude any of Microsoft’s evidence, any objection to its purported exclusion has been waived. 

Finally, Microsoft argues that it is entitled to a new trial because the Court excluded evidence 

of reexamination of the ‘449 patent. Microsoft’s arguments are meritless. As explained elsewhere 

in this opinion, the simple fact that a reexamination decision has been made by the PTO is not 

evidence probative of any element regarding any claim of invalidity. Procter & Gamble Co. v. Kraft 

Foods Global, Inc., 549 F.3d 842, 848 (Fed. Cir. 2008). Even if it were, the evidence was 

substantially more prejudicial than probative. FED. R. EVID. 403. 

Accordingly, as all of Microsoft’s arguments have been rejected, its motion is denied. 

MICROSOFT’S JMOLS & MNTS - OBVIOUSNESS AND ANTICIPATION 

In three separate motions, Microsoft argues that it is entitled to JMOL or a new trial on the 

issues of anticipation and obviousness. The motions involve six instances of prior art, and Microsoft 

forwards various arguments concerning how the prior art either anticipates the ‘449 patent or renders 

the invention obvious. Specifically, Microsoft moves for 1) JMOL arguing that the Rita SGML 

editor (“Rita”) in combination with U.S. Patent No. 5,587,902 (“Kugimiya”) renders the ‘449 patent 

obvious; 2) JMOL arguing that U.S. Patent No. 6,101,512 (“DeRose”) in combination with 

Kugimiya renders the ‘449 patent obvious; 3) a new trial arguing that Rita and DeRose anticipate 

the ‘449 patent or render it obvious when combined with Kugimiya; 4) a new trial arguing that 

Microsoft’s Macword 5 and WORD 6 products both anticipate the ‘449 patent; 5) JMOL or a new 

4 

trial arguing that Semi’s S (“S4") product anticipates the ‘449 patent or renders it obvious in 

combination with Kugimiya; 6) a new trial on the basis that the Court improperly instructed the jury 

with regard to Microsoft’s burden of proof on its invalidity defenses; and 7) a new trial on the basis 

that the Court improperly excluded evidence that the ‘449 patent was under reexamination by the 

20


Patent and Trademark Office (“PTO”). 

The invalidity arguments regarding the six prior art references are either based on the premise 

that there is no genuine issue of material fact regarding invalidity (in the case of the JMOL motions) 

or that the verdict is against the great weight of the evidence (in the case of the motions for new 

trial). Microsoft never moved for summary judgment on any of these invalidity arguments. 

Additionally, Microsoft only moved for a pre-verdict JMOL regarding the S4 reference. TT 5/19/09 

p.m. at 6-8 (“The second motion is for invalidity based on the SEMI S4 system. We believe the 

evidence presented establishes conclusively that it was sold more than a year before and that it 

embodied the patented invention.”). FED. R. CIV. P. 50(b); Duro-Last, Inc. v. Custom Seal, Inc., 321 

F.3d 1098, 1108 (Fed. Cir. 2003). Microsoft’s trial arguments regarding S4 rested on a very specific 

theory of invalidity, and its motion for JMOL mentioned only anticipation. While, Microsoft’s 

JMOL as to S4 was sufficient to preserve its right to a post-verdict JMOL regarding that specific 

prior art reference, it was insufficient to put either this Court or i4i on notice that Microsoft intended 

to challenge the sufficiency of the evidence with regard to its other theories of invalidity. See id. at 

1107 (noting that pre-verdict JMOL regarding a specific on-sale bar theory of invalidity was 

insufficient to preserve a post-verdict JMOL regarding obviousness because various theories of 

anticipation and obviousness require different elements of proof). Consequentially, Microsoft never 

challenged the sufficiency of i4i’s evidence in opposition to its anticipation and obviousness 

defenses based on Rita, DeRose, or Kugimiya (including the combination of S4 and Kugimiya) 

before the verdict. It has waived its right to a post-verdict JMOL on those references. 

However, regarding S4, Microsoft preserved its right and does move for post verdict JMOL 

on the issue of anticipation. In order to show that it is entitled to JMOL on its affirmative defense 

21


of invalidity Microsoft is required to prove the essential elements of that defense to a virtual 

certainty. Bank Of La. v. Aetna U.S. Healthcare Inc., 468 F.3d 237, 241 (5th Cir. 2006) (“For a 

defendant to obtain summary judgment on an affirmative defense, it must establish beyond dispute 

all of the defense's essential elements.”). During trial, Microsoft sought to prove that S4 violated 

the on-sale bar of 35 U.S.C. § 102(b). In order to prove anticipation by the on-sale bar, a defendant 

must show by clear and convincing evidence that (1) the invention was the subject of a commercial 

sale or offer for sale and (2) the invention was “ready for patenting” at the time of the offer or sale. 

Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998). The defendant must further show that both prongs 

occured before the critical date. 

It is undisputed that the inventors of the ‘449 patent, Mr. Vulpe and Mr. Owens, sold the S4 

system in the United States prior to the June 2, 1993 critical date. The main issue of contention 

during trial was whether the S4 system practiced the claims of the ‘449 patent. While Microsoft did 

present evidence on this issue, i4i also presented evidence either directly contradicting or discrediting 

Microsoft’s evidence. 

Mr. Vulpe and Mr. Owens both testified that the invention embodied in the ‘449 patent was 

only conceived of slightly before the patent application was filed and well after the critical date. TT 

5/11/09 p.m. at 111:10-115-12; TT 5/15/09 a.m. at 118:7-120:15; see also PX 594; PX 595; PX 627. 

Furthermore, the inventors testified that the S4 system that was sold prior to the critical date never 

implemented the invention contained in the patent. TT 5/11/09 p.m. at 109-110, 152-54; TT 5/15/09 

p.m. at 87:23-88:5. In specifically explaining how the S4 system operated, Mr. Owens testified that 

S4 did not to contain a “metacode map” as required by the ‘449 patented claims. TT 5/11/09 p.m. 

at 152:14-153:15. The other co-inventor, Mr. Vulpe, testified similarly. TT 5/15/09 at 90:20-22. 

22


Finally, i4i presented expert testimony, through Dr. Rhyne, that it was impossible to directly compare 

S4's operation with the claims of the ‘449 patent because S4's source code is unavailable. TT 

5/19/09 p.m. at 51-54. Dr. Rhyne further attacked the opinion of Microsoft’s technical expert, Mr. 

Gray, because Mr. Gray rendered an opinion regarding S4's anticipatory ability without reviewing 

the program’s source code. Id. 

Microsoft seems to suggest that it is i4i’s burden to present corroborating documentation for 

nearly every statement made by Mr. Vulpe and Mr. Owens. Simply because Microsoft chooses to 

base its anticipation defense on prior art created by the inventors of the patent-in-suit does not shift 

a burden onto those inventors to prove both the conception date of the patented invention and to 

disprove that the prior art anticipated. Cf. Shu-Hui Chen v. Bouchard, 347 F.3d 1299, 1309 (Fed. 

Cir. 2003) (“It is well established that when a party seeks to prove conception via the oral testimony 

of a putative inventor, the party must proffer evidence corroborating that testimony.”) (emphasis 

added). The burden remained on Microsoft to prove invalidity by clear and convincing evidence. 

i4i’s expert testimony attacking Mr. Gray’s opinion as to anticipation and Mr. Owen’s testimony that 

S4 did not practice the invention embodied in the ‘449 patent was legally sufficient to rebut 

Microsoft’s case of anticipation. The remainder of Microsoft’s arguments urge that the testimony 

of Mr. Vulpe and Mr. Owens is incredible and “self-serving.” These arguments are improper 

considering that the Court “may not make credibility determinations or weigh the evidence” when 

deciding a motion for JMOL. Thompson v. Connick, 553 F.3d 836, 851 (5th Cir. 2008). 

Furthermore, even if the Court were to weigh the evidence, Dr. Rhyne’s testimony that no 

one could assess whether S4 met the claims of the ‘449 patent without the relevant source code was 

compelling. Mr. Gray’s testimony regarding S4's ability to meet the ‘449 claim limitations failed 

23


to approach the specificity or detail that was applied by the parties to the infringing WORD products 

or the other prior art. Compare TT 5/18/09 p.m. at 163:4-173:13 with TT 5/18/09 p.m. at 91:20- 

92:16. In sum, there was a sufficient evidentiary basis for the jury to disbelieve that S4 embodied 

the ‘449 patented invention. As this was an essential element of Microsoft’s claim of anticipation, 

there was legally sufficient evidence for the jury to find that S4 did not anticipate the ‘449 patent. 

Additionally, because the jury’s verdict is also not against the great weight of the evidence, 

Microsoft’s motion for new trial regarding S4's anticipation is denied. 

Further, with regard to anticipatory prior art under § 102, Microsoft argued to the jury that 

its own products, MacWord 5 and WORD 6, anticipated the claims of the ‘449 patent. Microsoft 

now argues that the jury’s verdict necessarily rejecting this argument was against the great weight 

of the evidence. It is undisputed that Macword 5 and WORD 6 were both sold prior to the critical 

date. The parties’ dispute centered around whether a feature generally referred to as “bookmarks” 

and its underlying data structure within Macword 5 and WORD 6 constituted “metacodes” and a 

“metacode map” as defined by the Court. 

As mentioned above, the Court defined “metacode” as “an individual instruction which 

controls the interpretation of the content of the data” and “metacode map” as “a data structure that 

contains a plurality of metacodes and their addresses of use corresponding to a mapped content.” 

Microsoft’s technical expert, Mr. Gray, testified that the bookmark was both a metacode and that the 

data structure supporting a bookmark constituted a “metacode map” as required by the claims of the 

‘449 patent. TT 5/18/09 p.m. at 124-5, 127-30, 132-36; TT 5/18/09 a.m. at 111-12. In substance, 

Microsoft argues that Mr. Gray’s testimony shifted the burden to i4i to prove that the prior art 

WORD products and the accused products were materially different. 

24


Even if this were the case, i4i presented evidence that the vast majority of “data structures” 

contained within the infringing products are not contained within Macword 5 and WORD 6. TT 

5/18/09 a.m. at 109:1-110:6; Defendant’s Illustrative 4. Dr. Rhyne also explained how the lack of 

these additional data structures in the prior art versions of WORD failed to create “metacodes” or 

“metacode maps” as required by the claims of the ‘449 patent. TT 5/19/09 p.m. at 49:5-51:1. In 

fact, i4i introduced evidence that Microsoft’s own computer dictionary defined “bookmarks” as “a 

marker inserted in a specific point in a document to which the user may wish to return for later 

reference.” Id.; PX 526. This definition is far from the Court’s claim construction definition of 

“metacodes.” i4i further presented circumstantial evidence that “bookmarks” did not support the 

functionality defined by the ‘449 patent. Microsoft’s WORD 2003 Development Lead, Robert Little, 

testified that “bookmarks” were considered by the development team as a structure for implementing 

XML but concluded that “the bookmark approach would be too fragile.” See TT 5/18/09 p.m. at 

27:20-28:2. Furthermore, i4i presented a host of evidence showing that the functionality embodied 

within the accused WORD products was not contained in any prior versions of WORD. See, e.g., 

PX 270 at MS-i4i00299587 (“I don’t think we have any ideas how to do [custom XML] for Word”); 

PX 44 at MS-i4i00299478 (identifying custom XML within Word 2003 as a “new technology”); PX 

45 at MS-i4i00299583 (“[a]n XML authoring tool would be a logical new product for Microsoft. 

If Word was to morph in an XML direction, that would refresh that product and provide one more 

reason for users to upgrade.”). 

The jury was free to disbelieve Mr. Gray’s expert testimony, and there existed contrary 

testimony by Dr. Rhyne for the jury to conclude that MacWord 5 and WORD 6 did not meet the 

“metacode” and “metacode map” limitations of the ‘449 patent. In sum, the jury’s finding was not 

25


without support and certainly not against the great weight of the evidence. 

Microsoft further moves for a new trial arguing that the jury’s finding that Rita and DeRose 

did not anticipate the claims of the ‘449 patent was against the great weight of the evidence. Rita 

is a software application enabling users to create and edit documents using “tags” such as SGML 

documents. DX 2075. The DeRose patent discloses a system for generating, analyzing, and 

navigating electronic documents containing markup, such as SGML. DX 2179. 

With regard to Rita, i4i contested that the software application was sold before the critical 

date. Microsoft produced evidence that a single sale of a computer program called “Rita SGML 

editor” was sold in 1989. See DX 2080. Microsoft also presented evidence that there existed several 

publications discussing the operation of a computer called the “Rita SGML editor.” See DX 2075, 

DX 2076, DX 2077, DX 2078, DX 2079. In fact, Mr. Gray’s testimony regarding Rita’s anticipation 

was based on an amalgam of the Rita source code and the papers written about the Rita program. 

See TT 5/18/09 p.m. at 143:17-24 (explaining Mr. Gray based his opinion on the source code and 

the publications). Dr. Rhyne testified however that Microsoft’s invalidity analysis was based upon 

a later version of the Rita program than the one sold in 1989. See TT 5/19/09 p.m. at 46:6-16. 

Further, the Rita source code itself shows dates where the code was modified after the single sale 

occurred. Id.; PX 298. Dr. Rhyne concluded that, based upon the evidence, it was impossible to 

know the characteristics of the Rita program as sold in 1989 or which particular version of Rita was 

described in the publications. TT 5/19/09 p.m. at 46:11-14. In order for a claim to be anticipated, 

every limitation must be found in a single prior art reference. Planet Bingo, LLC v. GameTech Int’l, 

Inc., 472 F.3d 1338, 1346 (Fed. Cir. 2006). i4i presented enough evidence to cast doubt on whether 

any single “Rita” prior art reference contained each and every claim limitation. 

26


Furthermore, i4i presented evidence (assuming the amalgam of Rita references were a single 

prior art reference) that neither Rita or DeRose taught or practiced the “mapped content,” “metacode 

map,” or “address of use” limitations of the ‘449 claims. The issue properly submitted to the jury 

was whether a data structure known as a “tree structure” disclosed in Rita and DeRose could meet 

the Court’s definitions of “mapped content,” “metacode map,” or “address of use.” i4i presented 

voluminous testimony regarding this issue. See, e.g., TT 5/19/09 p.m. 35:2-5, 35-47. Microsoft 

presented contrary evidence. TT 5/18/09 p.m. at 144-160. Ultimately, there was conflicting 

testimony regarding this precise issue and the determination fell upon the credibility of the parties’ 

expert analysis. The jury’s determination that Rita and DeRose did not meet all the limitations of 

claims 14, 18, and 20 of the ‘449 patent was not against the great weight of the evidence. 

Microsoft further moves for a new trial because the great weight of the evidence supports its 

argument that the Rita, DeRose, and S4 references render the ‘449 patent obvious when combined 

with Kugimiya. Obviousness is ultimately a question of law, based on underlying factual 

determinations. Altana Pharma AG v. Teva Pharms. USA, Inc., 566 F.3d 999, 1007 (Fed. Cir. 2009). 

“The factual determinations that form the basis of the legal conclusion of obviousness include (1) 

the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences 

between the claimed invention and the prior art; and (4) evidence of secondary factors, known as 

objective indicia of non-obviousness.” Id. Secondary considerations include commercial success, 

long felt but unresolved needs, and failure of others. Graham v. John Deere Co., 383 U.S. 1, 17-18 

(1966). “Evidence of secondary considerations . . . are but a part of the ‘totality of the evidence’ that 

is used to reach the ultimate conclusion of obviousness.” Richardson-Vicks Inc. v. Upjohn Co., 122 

F.3d 1476, 1483 (Fed. Cir. 1997). In some cases, such evidence is dispositive. Id. 

27


Microsoft’s obviousness arguments regarding Rita, DeRose, and S4 are the same. It argues, 

alternatively to its anticipation arguments, that each of those references practice all the limitations 

of the asserted ‘449 claims except the “metacode maps” and “mapped content” limitations. It then 

asserts that Kugimiya contains the missing limitations. 

There was directly contradictory evidence on whether Kugimiya was in a different field, 

addressed a different problem, had a different configuration, or yielded different results from Rita, 

DeRose, or S4. See TT 5/19/09 at 60-61. In essence, Dr. Rhyne’s testimony regarding Kugimiya 

was that it was an invention directed at an entirely unrelated field and subject matter (translation) 

than Rita, DeRose, or S4 (document editing processing). Id. Microsoft cites evidence that it refers 

to as “conclusive” concessions by i4i that Kugimiya meets the “metacode map” limitation. See DX 

2002 at 123 (failing to argue, in the prosecution history of the ‘449 patent, that Kugimiya lacked a 

metacode map); TT 5/15/09 p.m. at 66:3-67:15 (inventor conceding that he did not invent a 

metacode map). Even if the Court were to accept the dubious conclusion that this evidence 

“conclusively” proves that Kugimiya teaches a “metacode map,” the obviousness analysis requires 

more than proof that a single claim limitation is met by a prior art reference. 

As discussed above, i4i also presented abundant evidence contesting whether Rita and S4 

were even complete prior art references and also contesting whether DeRose contained the “mapped 

content,” “metacode map,” and “address of use” limitations of the ‘449 patented claims. Also, in 

addition to the evidence combating whether Kugimiya, Rita, DeRose, and S4 were in the same field 

of innovation, i4i presented abundant evidence of secondary considerations of non-obviousness. i4i 

presented evidence that Microsoft both noted the absence of i4i’s patented technology in its previous 

WORD products as well as praised the utility of i4i’s products. See, e.g., PX 49; PX 271 at 

28


i4i0003274; PX 103 at MS-i4i00717147. i4i was presented an award from the PTO for its 

commercial embodiment of the ‘449 patent. Plaintiffs’ Illustrative 6. Further, i4i presented evidence 

that Microsoft struggled to design a dynamic custom XML editor. See, e.g., PX 281 at i4i019733; 

PX 270 at i4i00299585, i4i00299587; PX 195 at 3. There was also evidence of a long felt need in 

the industry for a dynamic custom XML editor. See, e.g. PX 81 at 1-2; PX 270 at MS-i4i00299588, 

i4i00299584; PX 45 at MS-i4i00299583; PX 270 at i4i00299587 (specifically addressing the need 

for separate content and metacodes). i4i also presented evidence of the success of commercial 

embodiments of the invention. See, e.g., TT 5/13/09 p.m. at 44-178; 5/15/09 a.m. at 19-104. In the 

wake of i4i’s voluminous evidence of secondary considerations supporting nonobviousness, 

Microsoft’s modest showing of Kugimiya combined with Rita, DeRose, or S4 does not render the 

jury verdict against the great weight of evidence. 

Next, Microsoft argues that it is entitled to a new trial on the basis that the Court improperly 

instructed the jury that Microsoft was required to prove invalidity by clear and convincing evidence 

regarding prior art not before the PTO. Microsoft bases its claim off of dicta found in the Supreme 

Court’s decision in KSR International Co. v. Teleflex Inc. that the rationale behind the clear and 

convincing evidence standard seems “much diminished” when defendants present evidence of prior 

art not considered by the PTO. 550 U.S. 398, 426 (2007). First, the KSR Court did not specifically 

hold that the clear and convincing standard was inapplicable when the PTO did not consider the 

particularly relevant prior art. Second, the law remains overwhelmingly that patents are to be 

presumed valid and it is the defendant’s burden to prove invalidity by clear and convincing evidence. 

See z4 Techs., Inc. v. Microsoft Corp., 507 F.3d 1354-55 (Fed. Cir. 2007); 35 U.S.C. § 282. Finally, 

Microsoft has cited no authority firmly supporting its proposed “preponderance of the evidence” 

29


instruction either during the charge conference or now. Microsoft’s argument is overruled. 

Finally, Microsoft moves for a new trial on ground that the Court erroneously excluded 

evidence regarding the PTO’s ex parte reexamination of the ‘449 patent. At the time of trial, the 

PTO had granted reexamination, necessarily finding that there was a “substantial new question of 

patentability” regarding the ‘449 patent. See 35 U.S.C. § 312(a)(1). Microsoft’s arguments are 

meritless. The simple fact that a reexamination decision has been made by the PTO is not evidence 

probative of any element regarding any claim of invalidity. Procter & Gamble Co., 549 F.3d at 848 

(“As this court has observed, a requestor's burden to show that a reexamination order should issue 

from the PTO is unrelated to a defendant's burden to prove invalidity by clear and convincing 

evidence at trial.”). Even if it was, its probative value is substantially outweighed by its prejudicial 

effect in suggesting to the jury that it is entitled to ignore both the presumption of validity and the 

defendant’s clear and convincing burden at trial. See FED. R. EVID. 403. Microsoft’s argument is 

overruled. 

Therefore, for the foregoing reasons, Microsoft’s various motions for JMOL and for a new 

trial regarding anticipation and obviousness are denied. 

MICROSOFT’S MNT OR REMITTITUR - DAMAGES 

Microsoft moves for JMOL on the issue of damages contending that i4i presented legally 

insufficient evidence to support the jury award for two main reasons: 1) the Wecker survey 

supporting the damage award is inherently unreliable and should have been excluded; 2) i4i’s 

damages expert’s, Mr. Wagner, opinion as to the amount of damages was inherently unreliable. 

Regarding the Wecker survey, Microsoft first argues that the Court erred in admitting the 

physical survey because it is hearsay. Though the survey was extensively explained by i4i’s experts 

30

and the survey results and questionnaire were both admitted into evidence, the true “evidence” 

supporting i4i’s damages calculation is the opinion of i4i’s damages expert, Mr. Wagner, along with 

the opinion of Dr. Wecker supporting the reliability of the survey. Both Dr. Wecker’s and Mr. 

Wagner’s opinions relied upon the survey results. Therefore, the admissibility of the survey itself 

(including the raw results and the questionnaire) is not governed by the hearsay exceptions, but 

rather, Federal Rule of Evidence 703. That rule provides: “[f]acts or data that are otherwise 

inadmissible shall not be disclosed to the jury by the proponent of the opinion or inference unless 

the court determines that their probative value in assisting the jury to evaluate the expert's opinion 

substantially outweighs their prejudicial effect.” FED. R. EVID. 703. In all of its objections to the 

Wecker survey, Microsoft only argues that the survey is “prejudicial” because it is “unreliable” under 

Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Federal Rule of Evidence 

702. Thus, whether the survey was properly before the jury is a question falling squarely under the 

Daubert analysis rather than traditional hearsay rules. Soden v. Freightliner Corp., 714 F.2d 498, 

502-03 (5th Cir. 1983) (“[U]nder Rule 703 an expert can discuss as the basis for an opinion facts or 

data which are otherwise inadmissible hearsay, ‘[i]f of a type reasonably relied upon by experts in 

the particular field in forming opinions or inferences upon the subject.’”) (quoting FED. R. EVID. 

703). 


Nevertheless, Microsoft cites Schering Corp. v. Pfizer, 189 F.3d 218 (2d Cir. 1999), for the 

proposition that hearsay rules always apply when determining the admissibility of survey evidence. 

There, a district court excluded five surveys from evidence for all purposes at a preliminary 

injunction hearing. Schering, 189 F.3d at 223. The surveys were offered to directly show that the 

defendants were engaged in ongoing violations of a settlement agreement. Id. at 224. The surveys 

31


themselves were the primary evidence in support of the plaintiff’s preliminary injunction motion. 

Id. The Second Circuit discussed the surveys’ admissibility in light of various exceptions to the 

hearsay rule, including the residual exception. Id. at 224-40. The court also discussed the 

“trustworthiness” of the surveys as it applied to Federal Rule of Evidence 807. Id. at 231-36. 

However, the Schering court had no occasion to discuss the admissibility of survey evidence under 

Rule 703. However, the court did note that Rule 703 was an acceptable basis to admit survey 

evidence. Id. at 227 (“the advisory committee for the Federal Rules of Evidence has suggested that 

surveys are sometimes best admitted as bases of expert testimony pursuant to Rule 703"). 

In the present case, i4i sought admission of the survey and its results for the sole purpose of 

supporting Mr. Wagner’s opinion regarding damages. Additionally, i4i also presented Dr. Wecker’s 

testimony for the sole purpose of supporting the reliability of the survey. Unlike Schering, this is 

a case where survey evidence is best admitted through Rule 703, rather than the hearsay rules. The 

Schering opinion is inapplicable. Further, Microsoft’s suggestion that survey results must fall under 

a hearsay exception to qualify as “reliable” under Rule 703 is rejected. Microsoft cites no authority 

that “reliability” under Rule 703 is intimately linked to the various hearsay exceptions and Schering 

certainly does not support Microsoft’s argument. Rather, as is apparent from the Rule’s plain text, 

Rule 703 is an independent basis for admitting evidence that is “otherwise inadmissible.” See FED. 

R. EVID. 703. 

Under Rule 703, surveys are admissible “if they are pertinent to the inquiry, upon a showing 

that the poll is reliable and was compiled in accordance with accepted survey methods.” C. A. May 

Marine Supply Co. v. Brunswick Corp., 649 F.2d 1049, 1054 (5th Cir. 1981). Here, the survey was 

prepared by Dr. Wecker, a highly qualified expert in statistics and applied mathematics. See TT 

32


5/15/09 a.m. at 22:14-26:18, 29:1-5. Dr. Wecker testified that this survey was designed specifically 

to provide a reliable statistical sample of a population for extrapolation over the entire population. 

TT 5/15/09 p.m. at 26-19. He also provided extensive testimony concerning his use of accepted 

methodology in designing the questionnaire, selecting the sample, collecting the information, and 

analyzing the raw result data for extrapolation. Id. at 29:6-51:24. The survey was actually 

performed by telephone interview by a survey company called Opinion Research Company (“ORC”). 

Dr. Wecker testified that neither ORC or the respondents to the telephone interview knew the 

purpose of the survey. TT 5/15/09 a.m. at 40:14-21; PX 365. 

Microsoft argues that the survey was unreliable because it was not directed at individual 

computer users within an organization. The survey was directed to computer administrators within 

an organization who would have personal knowledge concerning how individuals within that 

organization used the accused WORD products. See 5/15/09 a.m. at 35:24-38:1, 67:8-68:23; PX 

365. Dr. Wecker testified that an “I don’t know” response was added to the survey questions in 

order to minimize estimation by the respondents. TT 5/15/09 a.m. at 35:24-38:19, 64:13-65:24, 68:2- 

69:12. In the face of testimony concerning the reliability of the survey’s respondent pool, Microsoft 

does not present any authority requiring that reliable survey data come only from a particular subset 

of individuals with personal knowledge of underlying events. As trial testimony revealed, the survey 

was designed to identify those individuals with direct personal knowledge of how an organization’s 

workstaff used the accused WORD products. The simple fact that the survey did not ask each 

individual within an organization about their use of the accused products is not essential to 

33


6 reliability, and in fact, would defeat the very purpose of a “statistical sample” survey. 

Microsoft also argues that the survey was inherently unreliable because it failed to distinguish 

between infringing uses of custom XML and non-infringing uses. First, i4i presented evidence that 

non-infringing uses of custom XML were rare and defeated the purpose of using the feature. See TT 

5/13/09 p.m. at 80-83. Second, there was expert testimony that a user utilizing WORD’s XML 

feature in a non-infringing manner would also use it in an infringing manner. Id. Finally, within Mr. 

Wagner’s “reasonable royalty” calculation, he excluded the percentage of users, based on 

Microsoft’s own internal survey data, who used XML in the most frequent of non-infringing 

manners. TT 5/13/09 p.m. at 81-83, 85-86. 

Microsoft also alleges that Dr. Wecker’s interpretation of the survey data was unreliable 

7 

because he “changed” several survey responses because of logical inconsistencies. Dr. Wecker 

testified that inconsistent responses within survey results is a common problem in the field and is 

solved using an accepted statistical practice known as “logical imputation,” which generally acts to 

adjust logically inconsistent responses by determining whether a respondent’s understandable 

misunderstanding of a survey question resolves the logical inconsistency. TT 5/15/09 a.m. at 42:6- 

6 

Microsoft also argues that the survey is unreliable because it failed to define various technical terms used 

within the survey. In fact, the survey does define, with precision, several terms used throughout the operative 

portions of the questions. See PX 365 at 3. Some terms that Microsoft’s expert expressly asserted are undefined in 

the survey are explicitly defined. Id. (defining “custom XML”); 5/18/09 a.m. at 39:1-10 (asserting the “custom 

XML” went undefined). Further, the survey defines terms in such a way that someone trained in computer 

administration might actually understand the survey questions better than an individual user. Thus, as Dr. Wecker 

explained, the survey was tailored to its target respondents. TT 5/15/09 a.m. at 67:8-68:23. 

7 

In a much-discussed example during trial Dr. Wecker altered a response literally indicating that the 

respondent’s business had 4 computers and 3% of those used WORD products in an infringing manner. Because 3% 

of 4 is obviously logically inconsistent, Dr. Wecker testified that it was logical to conclude that the respondent had 

simply provided the number of computers (rather than the percentage) within the business that used the WORD 

products in an infringing manner. See TT 5/15/09 a.m. at 43-45. Thus, replacing “3%” with “3 computers” resolved 

the logical inconsistency in a manner that preserved the integrity of the data-point. See id. 

34

47:22. 


Finally, the purpose of this Court’s “gatekeeper” function under Daubert is served by 

“ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at 

hand.” Daubert, 509 U.S. at 597. The Court has found that there is sufficient evidence that the 

Wecker survey is both relevant and rests on a reliable foundation. Additionally, “[v]igorous 

cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof 

are the traditional and appropriate means of attacking shaky but admissible evidence.” Id. at 596. 

Microsoft vigorously cross-examined both Dr. Wecker and Mr. Wagner concerning the survey and 

their opinions generally. See, e.g., TT 5/13/09 p.m. at 97-101, 103-107, 131-133, 140-42. Further, 

Microsoft presented its own experts who attacked the Wecker survey on every basis set forth in its 

motion. See, e.g., TT 5/18/09 a.m. at 32-76; TT 5/19/09 a.m. at 88-90, 96-97. Therefore, any 

remaining complaints that Microsoft had about the survey concerned its weight and not its 

admissibility. See Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 488 (5th Cir. 2004) 

(“Usually, methodological flaws in a survey bear on the weight the survey should receive, not the 

survey's admissibility.”). 

Microsoft next contends that Mr. Wagner’s opinion regarding a reasonable royalty rate was 

unreliable. First, Microsoft argues that using the listed price of a third party product, “Xmetal,” as 

a benchmark for a royalty rate was improper. Mr. Wagner testified that he reviewed several 

products, available in the market around the time infringement began, with stand-alone XML 

capabilities. See TT 5/13/09 p.m. at 54:14-55:21. One of these products was to serve as a beginning 

point for determining a reasonable royalty rate. Id. Mr. Wagner explained that he ultimately chose 

Xmetal because the other products he considered either had too high of a price or did not have 

35


similar capabilities as the XML functionality in the accused products. Id. at 55:22-56:19. Further, 

Xmetal was being used internally within Microsoft during the relevant time period. See id. at 56:20- 

57:7. He further testified that Xmetal was a true market example of what customers specifically 

desiring XML functionality would have paid for the product. Id. at 57:8-58:6. Microsoft cites no 

authority for the proposition that using such a method is unreasonable or unreliable. In the face of 

Mr. Wagner’s testimony that such a method is generally appropriate when estimating market value, 

the question of whether Xmetal was the “best” basis for a royalty calculation was properly submitted 

to the jury. In fact, the factors for calculating a reasonable royalty under Georgia-Pacific Corp. v. 

U.S. Plywood Co., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), make the character of the commercial 

embodiment of the invention, the benefits to those who have used the invention, the extent to which 

the infringer has made use of the invention, and any evidence probative of the value of that use 

specifically relevant to the “reasonable royalty” analysis. As the value of Xmetal in the marketplace 

was relevant to all of these factors, it was properly considered by Mr. Wagner in his analysis. 

Next, Microsoft asserts that Mr. Wagner’s application of a “25% rule of thumb” concerning 

royalty rates was improper. Mr. Wagner testified that it was customary within his field to apply a 

“25% rule of thumb” whereby an inventor will generally receive 25% of the profit from the sale of 

that invention by a licensee. See TT 5/13/09 p.m. at 53:23-54:9, 54:10-13, 74:6-20, 120:23-121:2. 

Microsoft both cross-examined Mr. Wagner on the application of the rule of thumb and presented 

contrary evidence. See e.g., id. at 53-54, 57:2-7; TT 5/19/09 at 94-96. Again, the Georgia Pacific 

factors make “the portion of the profit or of the selling price that may be customary in the particular 

business or in comparable businesses to allow for the use of the invention or analogous inventions” 

relevant to the damages analysis. Thus, considering the foundation laid by Mr. Wagner’s testimony, 

36


his application of the 25% rule was relevant and appropriately considered. 

Finally, Microsoft asserts that Mr. Wagner’s opinion comparing his damages calculation with 

Microsoft’s total operating profit off the accused WORD products was improperly admitted. 

Microsoft essentially argues that this portion of his testimony was a “back-door” attempt to argue 

an “entire market value” theory of royalties to the jury. Mr. Wagner testified that as a 

“reasonableness check” on his damages calculation he compared his $200-207 million royalty 

calculation with the total operating profit earned by Microsoft from the sale of the accused WORD 

products. First, this objection was never made by Microsoft at the time the opinion was introduced. 

TT 5/13/09 p.m. 87-89. Second, i4i never argued an “entire market value” theory to the jury and 

never insinuated that Mr. Wagner’s “check” be considered for such a purpose. Indeed, had i4i been 

permitted to argue an “entire market value” theory, it would have been entitled to a substantially 

8 

larger portion of Microsoft’s operating profit than under Mr. Wagner’s theory of damages. DePuy 

Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1331 (Fed. Cir. 2009) (explaining that 

the entire market value rule “permits a patentee to recover the entire value of an apparatus that 

contains both patented and unpatented components”). Thus, Mr. Wagner’s “reasonableness check” 

testimony was properly admitted. 

Alternatively to JMOL, Microsoft requests remittitur. Microsoft does not present any 

additional grounds for remittitur other than those already stated in its request for JMOL. Remittitur 

is within the sound discretion of the trial court and is only appropriate when the damages verdict is 

“clearly excessive.” See Thompson v. Connick, 553 F.3d 836, 865 (5th Cir. 2008). Microsoft’s 

8 

Mr. Wagner testified that his $200-207 million damages estimate was less than 1 ½ % of Microsoft’s total 

profit off of the accused WORD products. See id. at 89. 

37


request for remittitur is denied for the same reasons outlined above and for the additional reason that 

it has failed to show or even discuss why the verdict was “clearly excessive.” See supra n.8. In sum, 

Microsoft’s motion for JMOL regarding damages or remittitur is denied. 

i4i’s MOTION FOR JUDGMENT ON THE JURY VERDICT AND ENHANCED DAMAGES 

As stated above, the jury found that Microsoft willfully infringed the ‘449 patent. i4i now 

moves for judgment on the jury verdict and for enhanced damages and attorneys’ fees in accordance 

with the jury finding. A court may in its discretion enhance damages up to three times when there 

is a finding of willful infringement or bad-faith on the part of an infringing party. 35 U.S.C. § 284; 

see SRI Int'l, Inc. v. Advanced Techs. Labs., Inc., 127 F.3d 1462, 1468-69 (Fed. Cir. 1997). “Bad 

faith” in this context refers to an infringer's lack of due care with regard to avoiding infringement 

and is more properly called “bad faith infringement.” Jurgens v. CBK, Ltd., 80 F.3d 1566, 1571 

(Fed. Cir. 1996). Although “bad faith” acts such as litigation misconduct are not sufficient alone to 

support an enhancement of damages, assuming the requisite culpability is present, such acts can be 

considered in determining whether to award enhanced damages and how much to award. See id. at 

1570-71. A finding of willful infringement provides sufficient culpability to justify the enhancement 

of damages under § 284. See id. at 1571, 1573. 

Enhanced damages are a punitive measure taken by a court to penalize a willful infringer for 

his or her increased culpability. See id. at 1570. However, a court can refrain from awarding 

enhanced damages in light of a finding of willfulness based on the weight of the evidence supporting 

willfulness and the closeness of the issues at trial. See Brooktree Corp. v. Advanced Micro-Devices, 

Inc., 977 F.2d 1555, 1582 (Fed. Cir. 1992); Laitram Corp. v. NEC Corp., 115 F.3d 947, 955 (Fed. 

Cir. 1997). “The paramount determination in deciding enhancement and the amount thereof is the 

38


egregiousness of the defendants' conduct based on all the facts and circumstances.” Read Corp. v. 

Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992), abrogated on other grounds by Markman v. 

Westview Instruments, Inc., 52 F.3d 967, 975 (Fed. Cir. 1995) (en banc). Factors courts consider in 

deciding whether to enhance damages and the amount of enhancement include: (1) whether the 

infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew 

of the other's patent protection, investigated the scope of the patent and formed a good-faith belief 

that it was invalid or that it was not infringed; (3) the infringer's behavior as a party to the litigation; 

(4) the defendant’s size and financial condition; (5) closeness of the case; (6) duration of the 

defendant’s misconduct; (7) remedial action by the defendant; (8) the defendant’s motivation for 

harm; (9) whether the defendant attempted to conceal its misconduct. Id. at 827. 

In addition, attorneys' fees and costs may be awarded in “exceptional cases” to the 

“prevailing party.” 35 U.S.C. § 285. i4i argues that an award of fees and costs are appropriate 

because of a finding of willfulness alone. However, “exceptional cases” may, but are not required 

to, include the jury's finding of willfulness. Insituform Techs., Inc. v. Cat Contracting, Inc., 518 F. 

Supp. 2d 876, 895 (S.D. Tex. 2007) (citing Avia Group Int'l, Inc. v. L.A. Gear Ca., Inc., 853 F.2d 

1557, 1567 (Fed. Cir. 1988)). “The decision to increase damages is committed to the discretion of 

the trial judge . . . .” Modine Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990). 

However, in cases where there has been an express finding of willfulness, the trial court must, in 

denying attorneys’ fees, “explain why the case is not ‘exceptional’ within the meaning of 35 U.S.C. 

Section 285.” Id. 

The evidence at trial established that Microsoft was aware that i4i had obtained a patent in 

support of its XML editing software. See TT 5/12/09 a.m. at 75:24-77:21, 81:2-81:22; PX 13; TT 

39


5/12/09 a.m. at 80:4-81:1; PX 92; TT 5/13/09 a.m. at 17:18-18:10; PX 49. Despite this, Microsoft 

did not present any evidence (or argue to the jury) that it ever conducted any investigation regarding 

the patent or i4i’s products. Particularly damaging on this point is a January 22, 2003 email sent by 

Martin Sawicki, a member of Microsoft’s XML for Word development team. See PX 49. The email 

is a response to another Microsoft employee who forwarded a message to Mr. Sawicki from i4i 

explaining its products and specifically mentioning the ‘449 patent. Id. In the email Mr. Sawicki 

notes “we saw [i4i’s products] some time ago and met its creators. Word 11 will make it obsolete. 

It looks great for XP though.” Id. The email confirms Microsoft’s awareness of the ‘499 patent, its 

relationship to i4i’s products, as well as Microsoft’s intention to implement similar capabilities in 

WORD. 

Conversely, i4i did not present evidence (or argue) that Microsoft deliberately copied the 

patented invention or any of i4i’s products or that Microsoft attempted to conceal its intention to 

subvert i4i’s product. Microsoft is undisputedly, “the worldwide leader in software, services, and 

Internet technologies for personal and business computing.” DX 2037. Microsoft’s 2008 revenue 

was $60.42 billion. PX 144. Although the jury award is substantial, it is a small fraction of the 

profit that Microsoft has gained from sales of its WORD products alone. See TT 5/13/09 p.m. at 

87:20-89:7. Rather than secrecy, the trial evidence revealed that Microsoft’s intention to move 

competitors’ XML products to obsolescence was quite bold. See PX 100 at MS-i4i00717664 (“My 

main concern with I4I [sic] is that if we do the work properly, there won’t be a need for their product 

. . . .”); PX 48 at MS-i4i00312029 (“The absence of a strong XML authoring environment targeted 

at the middles to low end of the market may be indicative of an implied industry expectation that this 

area really belongs to Word and Word will eventually make obsolete any competitive attempts by 

40


third parties to conquer that market.”). 

In sum, the evidence shows that Microsoft knew of i4i’s patent protection in 2001 and 2003, 

did no investigation, and never formed a good-faith belief of non-infringement. The evidence further 

shows that Microsoft started using the infringing products beginning in 2002 and did not conduct 

an infringement investigation after being notified of the patent again in 2003. TT 5/15/09 a.m. at 

99:11-14. Microsoft’s arguments that somehow i4i’s evidence is weak, insubstantial, or unsupported 

are baseless. Microsoft simply argues the credibility of i4i’s evidence supporting enhancement and 

presents no evidence showing that Microsoft ever concerned itself with a strong likelihood of 

infringement. As the jury determined, i4i’s evidence is persuasive and credible. The uncontradicted 

evidence (as discussed above) relates that Microsoft had knowledge of the patent and its relation to 

i4i’s products and willfully chose to render the technology obsolete while simply ignoring the patent. 

Further, the fact that Microsoft presented many defenses within the context of this litigation 

and even succeeded in invalidating certain claims of the ‘449 patent during pretrial does not excuse 

its pre-infringement conduct or motivations. Microsoft also fails to cite any authority holding that 

successful defenses relating to claims not asserted at trial should weigh against enhancement. The 

remainder of Microsoft’s arguments regarding enhancement relate to its equitable laches defense. 

As that defense will be thoroughly discussed elsewhere in this opinion, it will not be repeated here. 

It will suffice to note, however, that the time i4i took to prepare for trial was unusually long, thus 

enhancing the amount of damages ultimately found by the jury. i4i’s delay in bringing suit, though 

generally reasonable, weighs against enhancement. 

Accordingly, Read factors 2, 4, 6, 7, and 8 support enhancement while factors 1 and 9 along 

with i4i’s delay weigh against enhancement. Regarding the “closeness of the case” factor, the jury 

41


found for i4i on every issue (including the amount of damages). Cf. Mass Engineered Design, Inc. 

v. Ergotron, Inc., No. 2:06 CV 272, 2009 WL 1035205 at *22 (E.D. Tex. 2009) (Davis, J.) (denying 

enhancement where the jury expressed deadlock on the issue of infringement during deliberation and 

ultimately returned a verdict of validity and infringement but agreeing with defendants’ valuation 

of damages). Without commenting on the relative “strength” of Microsoft’s defenses, the factor is 

at best neutral. 

Finally, also favoring enhancement is Microsoft’s counsel’s litigation conduct, specifically 

during trial. Throughout the course of trial Microsoft’s trial counsel persisted in arguing that it was 

somehow improper for a non-practicing patent owner to sue for money damages. He further 

persisted in improperly trying to equate i4i’s infringement case with the current national banking 

crisis implying that i4i was a banker seeking a “bailout.” 

These improper arguments were made in spite of the Court’s warnings. Microsoft’s trial 

counsel began voir dire by asking the following question to the jury panel: 

So an example might be that somebody has a patent that they're using not to protect 

a valuable product but someone's copying, but because they are attacking somebody 

because they just want to try to get money out of them. So it fits, for example, with 

the litigation question Mr. Parker asked. So if somebody felt that -- let's take this 

case for an example. If somebody felt that the patents were being used in a wrong 

way, not to protect a valuable product but a wrong way, could you find that patent 

invalid or noninfringed? 

Voir Dire Transcript 5/11/09 a.m. at 47:13-48:5 (emphasis added). In response, the Court sua sponte 

had counsel approach the bench and outside the hearing of the jury asked: 

THE COURT: I understand that you just told the jury if somebody was using the 

patent not to compete, that that was the wrong way to use the patent? 

MR. POWERS: No, not to compete; just to get money, not to protect anything. That's 

what I asked. 

THE COURT: What about protecting the patent? 

42


MR. POWERS: I'll ask it that way again. 

THE COURT: I just -- you know, I think you're sort of misstating the law, and I don't 

want to embarrass you in front of the jury. But I would appreciate it if you would 

clean that up. 

MR. POWERS: I appreciate that. I will do that. 

Voir Dire Transcript 5/11/09 a.m. at 48:14-49:5. Despite this admonition, Microsoft’s trial counsel 

continued to misstate the law and directly appeal to the jurors’ perceived prejudices. During opening 

statement, he stated that “we’re here because the bankers decided to achieve liquidity” and that “the 

banker cases are the ones where you don’t have a very successful product, and the bankers decide 

to try to get their money out another way.” TT 5/11/09 p.m. at 42:6-8; 32:1-16. Again, the Court 

sought to temper these statements with a specific instruction to the jury. Court’s Charge, Docket No. 

323 at 30 (“The law recognizes no distinction among types of patent owners. A patent owner may 

be a competitor of an accused infringer, but it does not have to be. The characterization of a patent 

lawsuit as good or bad or as misuse of the patent laws based upon the status of the patent owner is 

inappropriate and should not play any part in your deliberations.”). Regardless of this instruction, 

Microsoft’s trial counsel’s improper statements were again reinforced during closing argument. TT 

5/20/09 at 90:13-91:5 (“[i4i] had a product that failed. They had a patent that doesn’t work. They’re 

asking for a bail-out. President Tyler [sic] didn’t give bankers a bail-out. We would ask for you not 

to give one here either.”). 

As these arguments were persistent, legally improper, and in direct violation of the Court’s 

instructions, they are best considered within the framework of the Read factor analysis. Therefore, 

Microsoft’s trial misconduct also supports enhancement. 

Therefore, while the Court could enhance damages against Microsoft up to three times the 

jury verdict of $200,000,000, or $600,000,000, under the totality of the circumstances, enhancing 

43


damages to the maximum extent allowable under § 284 is not warranted. Accordingly, the Court 

awards an additional $40,000,000 to the jury award, making a total of $240,000,000 to be paid by 

Microsoft to i4i. 

For the same reasons that a maximum enhancement is not warranted, this is not an 

“exceptional case” under § 284. First, while improper, Microsoft’s litigation misconduct did not rise 

to the level of “exceptional” and is properly reflected in the damages enhancement. Cf. z4 Techs., 

Inc. v. Microsoft Corp., No. 6:06-cv-142, 2006 WL 2401099 at *22-25 (E.D. Tex. 2006) (Davis, J.) 

(concluding that attorneys’ fees were properly awarded where Microsoft withheld critical evidence, 

misled the Court regarding facts probative to the admissibility of certain evidence, and marked nearly 

3500 exhibits while only admitting 100 of those at trial). This, combined with a lack of evidence 

that Microsoft intentionally copied i4i’s patent or products and i4i’s lengthy delay prior to filing suit 

preclude an “exceptional” finding in this case. 

i4i’S MOTION FOR POST-VERDICT DAMAGES TO JUDGMENT, PREJUDGMENT 

INTEREST, AND POST-JUDGMENT INTEREST 

i4i moves for prejudgment interest, post-verdict damages until the time of judgment, and 

post-judgment interest. i4i’s request for post-judgment interest is uncontested and is, accordingly, 

granted pursuant to the provisions of 28 U.S.C. § 1961. 

Regarding post-judgment damages, i4i requests that the jury verdict of $200,000,000 be 

extrapolated as necessarily finding a royalty rate of $98 dollars per infringement over a royalty base 

of 1470 infringing units per day. This calculation would yield an ongoing royalty of $144,060 per 

day of infringement until final judgment. 

Importantly, Microsoft never contests that post-verdict damages are properly awarded in this 

44


case and never provides an alternative calculation for post judgment damages (even when an 

alternative calculation was directly requested at the hearing). Rather, Microsoft argues that i4i’s 

calculation of damages by extrapolating the damages found by the jury is an unreliable calculation 

of damages. First, Microsoft re-raises its complaints regarding the unreliability of the Wecker 

survey. Those arguments are overruled for the same reasons discussed above. 

Second, Microsoft argues that the damages calculations by Mr. Wagner cannot be properly 

extrapolated into the future. In fact, Dr. Wecker testified that the survey was specifically designed 

for extrapolation. TT 5/15/09 p.m. at 26-19. Furthermore, Mr. Wagner’s testimony reflected a per 

diem extrapolation based on both the survey data and other Georgia-Pacific factors. PX 631; TT 

5/13/09 at 78-80. Microsoft failed to object to the extrapolation data or Mr. Wagner’s testimony as 

“unreliable.” TT 5/13/09 at 9. 

Additionally, While the jury clearly based its damages award on Mr. Wagner’s testimony 

(considering that Microsoft’s damages model would have yielded a much smaller award), it was free 

to consider other evidence relevant to the Georgia Pacific factors when determining a “reasonable 

royalty.” This calculation is inherently based on some speculation. See Lindemann Maschinenfabrik 

GmbH v. Am. Hoist & Derrick Co., 895 F.2d 1403, 1406 (Fed. Cir. 1990) (“When a ‘reasonable 

royalty’ is the measure, the amount may again be considered a factual inference from the evidence, 

yet there is room for exercise of a common-sense estimation of what the evidence shows would be 

a “reasonable” award.”). Here, however, the jury’s award was clearly based on a particular damages 

model where the royalty rate and base that was applied can be determined with some specificity. The 

extrapolation suggested by i4i is simply a continuation of the damages calculation adopted by the 

jury. Considering Microsoft did not object to the method of extrapolation at trial and its underlying 

45


challenges to the reliability of all the damages testimony have been overruled, Microsoft does not 

raise any new compelling arguments leading to the conclusion that i4i should simply not be 

compensated for post verdict, prejudgment, infringement. See Nat’l Instruments Corp. v. Mathworks, 

Inc., 2:01-CV-11, 2003 WL 24049230 at *4 (E.D. Tex. June 23, 2003) (Ward, J.) (“A failure to 

award such damages would grant an infringer a windfall by enabling it to infringe without 

compensating a patentee for the period of time between the jury's verdict and the judgment.”). 

Accordingly, i4i’s request for post-verdict damages is granted in an amount of $144,060 per day of 

infringement from May 21, 2009 until final judgment. 

With regard to prejudgment interest, i4i requests interest compounded annually on the jury 

verdict which yields $37,097,032 in interest up to May 20, 2009 and simple interest at the current 

prime rate of 3.25% until the day of judgment (or $21,102 per day until judgment). Microsoft’s only 

argument is that i4i delayed in filing suit. Prejudgment interest must be awarded and any 

justification for withholding the award must have a relationship with the award of pre-judgment 

interest itself. Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 657 (1983). Where delay in filing 

suit is self-serving and resulted in prejudice to the defendants, witholding an award of prejudgment 

interest is appropriate. Crystal Semiconductor Corp. v. TriTech Microelectronics Int’l, Inc., 246 

F.3d 1336, 1362 (Fed. Cir. 2001) (finding plaintiff’s intentional withholding of notice of patent from 

defendant warranted denial of prejudgment interest). Here, as discussed elsewhere in this opinion, 

i4i’s delay in filing suit was not intentional and was merely for the purposes of prosecuting its patent. 

Furthermore, there was evidence that Microsoft was both aware of the patent number, i4i’s 

relationship with the patent, as well as the fact that i4i practiced the patented invention. As 

explained at length above, the jury found that Microsoft willfully infringed the ‘449 patent. Thus, 

46


the evidence and the jury verdict fail to support any argument by Microsoft that additional notice of 

infringement would have ameliorated any prejudice caused by i4i’s delay. For those reasons, 

Microsoft has failed to show that i4i is not entitled to prejudgment interest. Accordingly, i4i is 

awarded prejudgment interest of $37,097,032 up to May 20, 2009 and $21,102 per day thereafter 

until final judgment. i4i’s motion is granted in all respects. 

i4i’S MOTION FOR A PERMANENT INJUNCTION 

i4i requests an order permanently enjoining Microsoft from infringing the ‘449 patent. i4i 

proposes the following language: 

Microsoft is enjoined from performing the following actions with Microsoft 

Word 2003, Microsoft Word 2007 and Microsoft Word products not more than 

colorably different from Microsoft Word 2003 or Microsoft Word 2007 (collectively 

“Infringing and Future Word Products”) during the term of the ‘449 patent: 

1. making, selling, offering to sell and/or importing in or into the 

United States any Infringing and Future Word Products that have the 

capability of opening a .XML, .DOCX, or .DOCM file (“an XML file”) 

containing custom XML; 

2. using any Infringing and Future Word Products to open an XML 

file containing custom XML; 

3. instructing or encouraging anyone to use any Infringing and Future 

Word Products to open an XML file containing custom XML; 

4. providing support or assistance to anyone that describes how to use 

any infringing and Future Word Products to open an XML file containing 

custom XML; and 

5. testing, demonstrating or marketing the ability of the Infringing and 

Future Word Products to open an XML file containing custom XML. 

This injunction does not apply to any of the above actions wherein the 

Infringing and Future Word Products open an XML file as plain text. This injunction 

also does not apply to any of the above actions wherein any of the Infringing and 

Future Word Products, upon opening an XML file, applies a custom transform that 

removes all custom XML elements. 

See i4i’s Motion for Permanent Injunction, Docket No. 349 at 1-2. Importantly, i4i does not request 

that Microsoft disable the infringing custom XML functionality contained in current versions of the 

47


infringing WORD products that have been sold prior to the entry of any permanent injunction. 

In determining whether to issue a permanent injunction in patent cases, courts apply the four 

factor test provided for in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 394 (2006). A party 

is entitled to a permanent injunction only if: “1) [the party] has suffered an irreparable injury; 2) that 

remedies at law, such as monetary damages, are inadequate to compensate for that injury; 3) that, 

considering the balance of hardships between the [parties], a remedy in equity is warranted; and 4) 

that the public interest would not be disserved by a permanent injunction.” Id. at 391. The Supreme 

Court held “the decision whether to grant or deny injunctive relief rests within the equitable 

discretion of the district courts, and that such discretion must be exercised consistent with traditional 

principles of equity, in patent disputes no less than in other cases governed by such standards.” Id. 

at 1841. 

First, i4i has overwhelmingly shown that it has been irreparably injured by Microsoft’s 

continuing infringement of the ‘449 patent and could not be compensated with monetary damages. 

The fact that there is direct competition in a markplace weighs heavily in favor of a finding of 

irreparable injury. See Brooktrout, Inc. v. Eicon Networks Corp., 2:03-CV-59, 2007 WL 1730112, 

at *1 (E.D. Tex. June 14, 2007) (Ward, J.). i4i’s founder and co-inventor of the ‘449 patent, Michel 

Vulpe, testified that Microsoft is i4i’s direct competitor within the custom XML marketplace. TT 

5/15/09 at 16:16-18; TT 5/12/09 a.m. at 25:7-21. There was also testimony that this direct 

competition was a result of Microsoft’s inclusion of the infringing custom XML functionality within 

its popular WORD product. TT 5/12/09 a.m. at 25:7-21. i4i’s damages expert also testified that 

Microsoft’s entry into the custom XML marketplace rendered i4i’s products obsolete in 80% of that 

market. See TT 5/13/09 p.m. at 66:10-68:4, 143:2-18. Microsoft also identified i4i as a “potential 

48


distraction” within the custom XML market before the release of its infringing products. PX 51. 

Also prior to the infringing products, Microsoft recommended i4i’s products as a solution for its 

customers seeking custom XML functionality. See, e.g., PX 172; PX 214; PX 18; PX 103; PX 39 

at i4i752374; TT 5/12/09 a.m. at 138:21-140:22. Finally, Microsoft recognized that the addition of 

custom XML into its WORD product would not only directly compete with i4i’s products, but render 

them obsolete within the market. See PX 100 at MS-i4i00717664 (“My main concern with I4I is that 

if we do the work properly, there won’t be a need for their product.”); PX 94 at MS-i4i00348452-53 

(“Word 11 will make [i4i’s product] obsolete. It looks great for XP though.”). 

In response to this evidence, Microsoft first argues that i4i’s “unreasonable delay” in filing 

suit evidences a lack of irreparable harm. While delay is a factor in considering irreparable harm, 

as discussed elsewhere in this opinion, i4i’s delay was not unreasonable. See Cordis Corp. v. Boston 

Scientific Corp., 99 Fed. Appx. 928, 934 (Fed. Cir. 2004); Polymer Techs., Inc. v. Bridwell, 103 F.3d 

970, 976 (Fed. Cir. 1996) (discussing the relevance of delay to the “irreparable harm” analysis in the 

context of preliminary injunctions). Furthermore, i4i’s delay in filing suit does not outweigh the 

overwhelming influence of Microsoft’s entry into the custom XML market. 

In response to i4i’s claims of direct competition, Microsoft presents evidence that i4i’s 

current products are designed to be compatible with Microsoft’s infringing WORD products and that 

Microsoft’s entry into the market allowed such “add-on” products to succeed. DX 2018 (i4i founder 

explaining that Microsoft’s entry into the market created opportunities for i4i); DX 2242 at 

2242.004; TT 5/13/09 p.m. at 144. This argument entirely misses the point. The fact that i4i is 

capable of existing in a marketplace where Microsoft is infringing does not negate the injury incurred 

as a result of Microsoft’s infringement. As Microsoft’s own documents suggest, there was a void 

49


in the custom XML market that Microsoft filled with infringing products. As a result, i4i was unable 

to sell its products within the same market space. Confirming Microsoft’s dominance of the XML 

market is evidence that i4i’s current business model is based off of customer pressure to create 

products that add functionality to the infringing WORD applications. TT 5/15/09 p.m. at 105:16-20; 

106:8-12. Simply because i4i adapted to a market where Microsoft fills 80% of the market space 

does mean that i4i has not suffered an irreparable injury. The evidence shows that i4i lost a, perhaps 

irretrievable, opportunity in the early days of the custom XML market. See PX 172. This continuing 

loss of market share and brand recognition is the type of injury that is both incalculable and 

irreparable. 

Microsoft argues that future damages are not incalculable because i4i has shown willingness 

to license the ‘449 patented technology to Microsoft. As evidence for this willingness Microsoft 

points to i4i’s damages expert’s, Michael Wagner, testimony regarding a hypothetical negotiation. 

Mr. Wagner assumed for the purposes of his damages analysis that i4i was willing to license the ‘449 

patent. See Wagner Expert Report Excerpt, Docket No. 369-3 at 24. In fact, Mr. Wagner recognized 

that there was no clear policy regarding whether i4i was willing to license its technology. Id. 

However, Mr. Wagner’s analysis concerned a hypothetical negotiation at the time the infringement 

began. The evidence clearly shows that i4i has not generated revenue by licensing its technology, 

and there is some documentary evidence to suggest i4i sought to retain exclusivity with regard to the 

‘499 patent. DX 2324 at 2324.007 (“License any piece that is not core to i4i IP value proposition 

(authoring) . . . .”). 

Microsoft further argues that an injunction is inappropriate because custom XML 

functionality is simply a small part of the infringing WORD products. See eBay, 547 U.S. at 396-97 

50


(Kennedy J., concurring) (explaining monetary damages may be sufficient when the patented 

technology is a small component of a larger product). While XML might be a small part of 

Microsoft’s WORD products, the irrefutable evidence (and Microsoft’s own documents) shows that 

there is an independent market for stand-alone custom XML. In fact, Microsoft does not contest that 

there are other stand-alone XML editors available in the market. See TT 5/13/09 p.m. at 54:14- 

55:21. The fact that Microsoft added the independently marketable technology to a larger program 

does not make the technology a “component” as described by Justice Kennedy. Rather, custom 

XML is an independent technology with a dedicated marketplace. As discussed above, the 

continuing loss of market share, customer goodwill, and brand recognition within that market are 

the type of losses that monetary damages are insufficient to cure. z4 Techs., Inc. v. Microsoft Corp., 

434 F. Supp. 2d 437, 440 (E.D. Tex. 2006) (Davis, J.). 

The balance of hardships also favors i4i. As i4i notes, Microsoft is the world’s largest 

software company with yearly revenues exceeding $60 billion. TT 5/13/09 p.m. at 59:17-60:16; 

167:9-19; DX 2037; PX 144. i4i’s business is comprised almost exclusively of XML authoring 

products based off of the ‘449 patent. TT 5/15/09 p.m. at 16:9-15; TT 5/15/09 a.m. 133:17-134:8. 

The impacts of this disparity are not insignificant. As discussed, there is no doubt that Microsoft has 

cornered the custom XML editing market. This fact has forced i4i to adopt a business model that 

supports infringing WORD products rather than one that could ever eventually lead to leadership 

within the XML market. On the other hand, as Microsoft concedes, custom XML is merely one of 

thousands of features within WORD. 5/13/09 p.m. at 89:22-90:3, 95:13-16. In addition, Microsoft’s 

own data suggests that less than 1% of its customers use custom XML. TT 5/18/09 at 51:5-15; 

5/13/09 at 61:22-62:16, 63:13-23; PX 631 (i4i’s survey data showing roughly 2% of Microsoft’s 

51


customers use the infringing functionality). Thus, the evidence clearly indicates that while custom 

XML is a small fraction of Microsoft’s business, it is central to i4i’s. 

Microsoft argues that redesigning current and upcoming WORD products is an enormous 

task. Microsoft suggests that compliance with i4i’s proposed injunction would take approximately 

five months to re-release the currently infringing products. See Tostevin Decl., Docket No. 369-7. 9 

While there is also some disagreement over whether Microsoft has the capability to disable the 

infringing functionality with a mere “software patch,” the Court will assume for the purposes of this 

analysis that complying with i4i’s injunction poses a not insubstantial burden on Microsoft. 

Regardless, Microsoft has not presented any evidence on alternative methods for compensating i4i 

for its previous and ongoing loss of customers, market share, and brand recognition. While 

Microsoft concedes it has the ability to comply with an injunction encompassing i4i’s proposed 

language, i4i will be continuingly injured without it. See Tivo v. EchoStar Commc’ns Corp., 446 

F. Supp. 2d 664, 669 (E.D. Tex.2006) (Folsom, J.), rev'd on other grounds, 516 F.3d 1290 (Fed. Cir. 

2008) (explaining that so called “sticky customers” continually shaped the market to patentee's 

disadvantage). Thus, the balance of hardships must favor the injured party. 

With regard to the public interest, i4i does not request that Microsoft disable infringing 

WORD products that are sold prior to the effective date of any injunction. i4i also indicated at the 

9 

i4i separately filed a motion to strike the Tostevin declaration on grounds that Tostevin was never 

disclosed under Federal Rule of Civil Procedure 26(a) or in response to i4i’s interrogatories seeking information 

regarding why i4i would not be entitled to a permanent injunction. As Microsoft notes, there is no instance either 

before or during trial where the “ease” of compliance with i4i’s proposed injunction was, or could have been, raised. 

The first instance where the information in Tostevin’s declaration became relevant to these proceedings was when i4i 

filed its motion for permanent injunction including its proposed injunctive language. Furthermore, the information 

provided in the Tostevin declaration is highly relevant to the effect of any injunction on Microsoft’s operations. The 

Court could not effectively evaluate the relevant eBay factors without this information and, had Microsoft not 

voluntarily provided it, it would have been requested by the Court. As such, i4i’s motion to strike the Tostevin 

declaration is denied. 

52

hearing, that it would be amenable to Microsoft providing support to customers who purchased 

infringing WORD products before the effective date of its proposed injunction. Thus, i4i’s proposed 

injunction would have little effect, if any, on the daily operations of Microsoft’s current customers. 

In addition, where products do not relate to a significant compelling public interest, such as health 

or safety, this factor weighs in favor of an injunction. See Tivo, 446 F. Supp. 2d at 670 (“The public 

has an interest in maintaining a strong patent system. . . . The infringing products are not related to 

any issue of public health or any other equally key interest.”). Custom XML does not relate to any 

of such key social interests. As a result, this factor also favors an injunction. Because all four eBay 

factors weigh in favor of injunctive relief, i4i’s motion is granted. 

Finally, with regard to the scope of the injunction, Microsoft argues that restricting it from 

“making” the infringing products is outside of the infringing activities asserted in this case because 

the asserted claims were method claims. Rather than contest this argument, i4i merely contends that 

“making” does not broaden the scope of the injunction. Microsoft is correct. Simply “making” the 

accused products is beyond the scope of the asserted method claims. In accordance with the Court’s 

duty to narrowly tailor injunctive language, a restriction on “making” accused and future related 

products will not be included in the injunctive language. See Fiber Sys. Int’l v. Roehrs, 470 F.3d 

1150, 1159 (5th Cir. 2006). In all other respects, i4i’s proposed injunctive language is adopted with 

the additional exception that Microsoft is permitted to provide support or assistance regarding the 

XML functionality to anyone purchasing the infringing WORD products before the injunction takes 

effect. 


MICROSOFT’S MOTION TO STAY INJUNCTION 

Microsoft moves to stay the injunction on three grounds: 1) Microsoft is likely to succeed 

53


on appeal; 2) Microsoft and the public will be irreparably harmed absent a stay; and 3) the pending 

re-examination of the ‘449 patent requires a stay. Whether to grant a stay under Federal Rule of 

Civil Procedure 62(c) requires consideration of 1) whether the stay applicant has made a strong 

showing that he is likely to succeed on the merits; 2) whether the applicant will be irreparably injured 

absent a stay; 3) whether issuance of the stay will substantially injure the other parties interested in 

the proceeding; and 4) where the public interests lies. 

Regarding the first factor, Microsoft argues that it has presented substantial legal questions 

regarding nearly every issue and that, since some of these questions are pure questions of law, they 

will be reviewed de novo. Indeed, this very situation is present in nearly every patent case following 

a jury verdict. For additional assistance in assessing this factor, the Fifth Circuit has held “the 

movant need only present a substantial case on the merits when a serious legal question is involved 

and show that the balance of the equities weighs heavily in favor of granting the stay.” Ruiz v. 

Estelle, 650 F.2d 555, 565 (5th Cir. 1981). Here, as discussed above, the balance of equities strongly 

favors i4i nearly every day Microsoft continues to sell its infringing products. As explained 

throughout this opinion, Microsoft does not present such a compelling case, either legally or 

factually, that would override the irreparable harm that its infringement imposes on i4i. This factor 

weighs against a stay. 

Also as mentioned above, it is likely that Microsoft will incur a loss as a result of an 

injunction. However, given Microsoft’s size and financial condition, the loss can not be considered 

irreparable. This factor also weighs against a stay. 

On the other hand, i4i will continue to be irreparably injured absent a stay. As discussed, the 

evidence shows that Microsoft’s presence in the custom XML market has altered the very nature of 

54


the marketplace for smaller competitors such as i4i. The fact of Microsoft’s infringement causes i4i 

to suffer irreparable harm for every new XML customer that purchases an infringing Microsoft 

product. To stay any injunction would only prolong that harm without providing any remedy. 

Finally, as discussed above, the injunction is narrowly tailored to cause minimal disruption to the 

public. This factor does not support a stay. 

Microsoft further argues that it is entitled to a stay pending reexamination of the ‘449 patent. 

At this time, the claims of the ‘449 patent have been provisionally rejected by the PTO. i4i has yet 

to respond in the reexamination proceedings. Courts typically consider the following factors when 

deciding whether to grant a stay pending reexamination: 1) whether a stay will unduly prejudice or 

present clear tactical disadvantage to the nonmoving party, 2) whether a stay will simplify the issues 

in question and the trial of the case, and 3) whether discovery is complete and whether a trial date 

has been set. Soverain Software LLC v. Amazon.com, Inc., 356 F. Supp. 2d 660, 662 (E.D. Tex. 

2005) (Davis, J.). Here, discovery has been completed, the issues have been resolved, and the case 

is ripe for final judgment. None of these factors favor a stay pending reexamination. Microsoft’s 

request for a stay is denied. 

Microsoft additionally proposes that, in lieu of an injunction, for its upcoming WORD 2010 

product, it would be able to 1) hide any XML functionality from the purchasers of WORD 2010, 2) 

activate the XML functionality upon demand from its customers, 3) track the use of such 

functionality, and 4) pay an ongoing royalty for such use. As i4i points out, this option would 

amount to a compulsory license, while ignoring i4i’s ongoing injury by way of loss of brand 

recognition and market share. It is clearly improper, and Microsoft’s request is denied. 

However, the Court finds it necessary to note that there has been an ongoing disagreement 

55


between the parties over the burden faced by Microsoft in complying with an injunction regarding 

current versions of WORD. Microsoft has presented evidence that it may take five months to 

implement any injunction. See Tostevin Decl., Docket No. 270-5 at ¶ 16. However, i4i has 

presented evidence that it is possible to design a software patch that can remove a user’s ability to 

operate the infringing functionality. Oddly, Microsoft’s proposal regarding WORD 2010 seems to 

imply an ability to manipulate its software beyond what has been previously indicated by Microsoft 

in its opposition to an injunction. 

Therefore, after considering this competing evidence, considering the ongoing irreparable 

injury faced by i4i, the amount of time that has already passed since the jury’s verdict, the burden 

on Microsoft, and given the uncertainty surrounding what period of time would be “reasonable” to 

expect Microsoft to comply with any injunction, the Court orders that Microsoft comply with the 

foregoing injunction within 60 days of the date of this order. 

FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING MICROSOFT’S 

EQUITABLE DEFENSES 10 

Laches 

Microsoft contends that the equitable doctrine of laches bars i4i from collecting damages for 

infringement prior to its filing suit. The basis of this argument is Microsoft’s assertion that i4i 

intentionally delayed filing suit and never notified Microsoft of probable infringement prior to filing. 

“Laches focuses on the dilatory conduct of the patentee and the prejudice which the patentee's delay 

has caused.” A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1031-32 (Fed. Cir. 

1992). To prove a defense of laches, a defendant must establish that 1) “the plaintiff delayed filing 

10 

To the extent that any conclusion of law is deemed to be a finding of fact, it is adopted as such; and 

likewise, any finding of fact that is deemed to be a conclusion of law is so adopted. 

56


suit for an unreasonable and inexcusable length of time from the time the plaintiff knew or 

reasonably should have known of its claim against the defendant” and 2) “the delay operated to the 

prejudice or injury of the defendant.” Id. at 1032. There is generally a six year presumption of delay 

and prejudice starting from the time a patent owner knew or should have known of the accused 

infringement. Id. at 1035-36. Here, both parties agree that the delay was shorter than six years. 

Therefore, Microsoft has the burden of proving both factors by a preponderance of the evidence. 

As background, i4i filed this suit on March 8, 2007. The first public distribution of the 

infringing WORD 2003 product was in late 2002. DX 2037; 2038. Microsoft presented evidence 

that i4i’s business strategy at the time of Microsoft’s infringement was focused on providing 

additional XML functionality to Microsoft’s products. TT 5/15/09 p.m. at 39:18-40:4; 5/12/09 p.m. 

at 12:3-20. Additionally, there was evidence that i4i received and tested beta versions of WORD 

2003 by late 2002. TT/5/15/09 p.m at 40:23-41:1. 41:12-21, 42:19-44:16. Indeed, Microsoft can 

show clearly that i4i had used the product it later accused of infringement by late 2002. TT 5/15/09 

p.m. at 43:24-44:1. However, Microsoft did not offer WORD 2003 for sale until October 2003. PX 

349. Microsoft has also proven that i4i did not have any additional contact with Microsoft regarding 

infringement between the time they received advanced copies of the infringing word products and 

the time of filing suit. TT 5/12/09 a.m. at 32:8-34:17; TT 5/15/09 p.m. at 39:15-17; DX 2370. 

However, Microsoft concedes that i4i conducted formal investigations into whether Microsoft was 

infringing the ‘449 patent subsequent to using the accused products between 2002 and the time this 

suit was filed. TT 5/20/09 a.m. at 148:20-155:4. 

i4i responds that its founder, Michel Vulpe, first started investigating possible infringement 

in early 2004. TT 5/12/09 a.m. at 38:8-14; 5/20/09 at 148:20-149:11. i4i’s board of directors then 

57


formed a task force to investigate possible infringement at Mr. Vulpe’s recommendation. 5/12/09 

a.m. at 32:8-22; 5:20 at 149:12-22. At that time, i4i retained a software engineer, Mike Sweet, to 

conduct an evaluation of both infringement and the prior art. TT 5/20/09 at 149:18-150:20. In 

approximately February 2005, after Mr. Sweet reported that there was reason to suspect Microsoft 

of possible infringement, i4i contacted several law firms regarding potential claims. TT 5/20/09 at 

150:11-151:2. i4i then retained Robins, Kaplan, Miller & Cirese L.L.P. as counsel. Id. at 150:21- 

151:12. i4i alleges that it finally concluded in late 2005, after its initial investigation and after 

consulting with outside counsel, that it had an infringement claim against Microsoft. Id. at 151:13- 

21, 153:1-11. 

The evidence produced a trial was clearly of a very technical nature. The infringement and 

invalidity arguments in this case were, by no means, superficial. For Microsoft to contend that i4i 

was reasonably notified of possible infringement because its employees used the infringing products 

in 2002 is absurd. However, i4i’s own admissions and evidence do support a conclusion that they 

should have reasonably known of infringement by the time their outside counsel and a technical 

expert confirmed probable infringement. i4i further explains, that at the time it knew of the 

infringement, it was financially unable to both continue to operate and pursue any claims against 

Microsoft. TT 5/12/09 a.m. at 33:14-25:22. Thus, i4i searched for investors and eventually secured 

the assistance of Northwater Capital Management on September 22, 2006. TT 5/19/09 a.m. at 51:9- 

52:9; PX 7. Within six months after financial backing was secured, suit was filed. Thus, i4i knew 

and reasonably should have known of infringement by late 2005. The parties collectively estimate 

that they have spent nearly $30 million dollars prosecuting this lawsuit. Though a substantial period 

of time, a year and a half of delay prior to filing suit in order to secure financial backing is not 

58


equitably unreasonable. 

In the meantime, during the same period, there is abundant evidence that Microsoft had 

notice of the patent, notice that i4i sold products that embodied the patent, and an intention to 

produce the same functionality in the infringing WORD products. See, e.g., PX 49 at MS- 

i4i00348452-53. Further, Microsoft has not produced any evidence that its actions would have 

changed had i4i’s specifically notified Microsoft of i4i’s belief that Word 2003 infringed the ‘449 

patent. The evidence provides a strong indication that Microsoft would not have stopped selling the 

accused products or redesigned them in any way. In fact, even after several years of litigation and 

a jury verdict of infringement, Microsoft requests the ability to continue selling the infringing 

products and release an upcoming product with the same infringing functionality. The evidence does 

not support Microsoft’s conclusion that it has suffered any significant financial prejudice as a result 

of i4i’s delay. The evidence supports a conclusion that, no matter when Microsoft was notified of 

possible infringement, its actions would not have changed. 

Regardless, Microsoft argues that it suffered evidentiary prejudice because of the loss of the 

S4 source code. The S4 system is relevant to Microsoft’s invalidity and inequitable conduct 

defenses. Mr. Vulpe and Mr. Owens, the creators of S4, admittedly could not remember the internal 

operation of S4. TT 5/11/09 p.m. at 157:12-158:8, 158:22-25; TT 5/15/09 p.m. at 109:20-110:6. 

They also admitted that the source code was discarded and could not be found. TT 5/11/09 p.m. at 

157:12-158:8; TT 5/15/09 p.m. at 110:7-111:11. Though Microsoft has no evidence of when the 

code was discarded, it argues that Mr. Vulpe’s and Mr. Owen’s recollections would have certainly 

been better in 2002, when i4i first received a beta version of WORD 2003. In fact, i4i presented 

evidence that S4 was a one-time project for one customer that was completed and delivered in 

59


February of 1993, nine years before Microsoft contends that i4i could have first filed suit. 

Furthermore, it is uncontested that Microsoft was provided users manuals, technical specification, 

and various documents related to S4. Interestingly, this is more information about a product created 

in 1993 than i4i had in 2002 regarding WORD 2003. 

Microsoft raised technical and lengthy defenses on non-infringement, laches, equitable 

estoppel, and invalidity based on six instances of prior art. It introduced numerous documents and 

hours of testimony regarding the S4 system alone. Though the source code of S4 certainly would 

have been an ideal and key piece of evidence, the testimony reveals that, even by 2002, it is 

extremely unlikely that S4's source code would have been in existence. In any event, Microsoft can 

not show that it was deprived of a “full and fair defense” because of the non-existence of the S4 

source code. See A.C. Aukerman, 960 F.2d at 1033. 

Ultimately, this is not a case where the “patentee [ ] intentionally [lay] silently in wait 

watching damages escalate.” Id. i4i made a concerted effort to carefully analyze the accused 

products, determine the extent of its infringement case, and then secure the financial ability to assert 

its claims. In the mean time, as the jury concluded, Microsoft ignored the ‘449 patent and i4i. As 

Microsoft did not prove either “unreasonable delay” or “prejudice” by a preponderance of evidence, 

Microsoft’s request for relief based on laches is denied. 

Inequitable Conduct 

Microsoft moves the Court to find the ‘449 patent invalid for inequitable conduct based on 

grounds that the inventor failed to disclose the S4 system to the PTO. The standard for showing 

inequitable conduct is stringent and well known. “Inequitable conduct resides in failure to disclose 

material information, or submission of false material information, with an intent to deceive, and 

60


those two elements, materiality and intent, must be proven by clear and convincing evidence.” 

Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 872 (Fed. Cir. 1988); see also 

Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1313 (Fed. Cir. 2008). Because an actual “intent to 

deceive” is required, “[m]istake or negligence, even gross negligence, does not support a ruling of 

inequitable conduct.” Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1353 (Fed. Cir. 2008). A court 

only has discretion to invalidate a patent for inequitable conduct after a showing of both materiality 

and intent to deceive. Id. When examining intent, the alleged conduct must be “viewed in light of 

all the evidence, including evidence indicative of good faith.” Kingsdown, 863 F.2d at 876. 

However, when a “failure to disclose” is alleged, intent to deceive may be inferred when 1) highly 

material information is withheld, 2) the applicant knew of the information and knew or should have 

known of the materiality of the information, and 3) the applicant has not provided a credible 

explanation for the withholding. Praxair, 543 F.3d at 1313-1314. 

There is no dispute that the application for the ‘449 patent was filed on June 2, 1994. DX 

2001. Michel Vulpe and Stephen Owens are named co-inventors of the patent. Id. There is also no 

dispute that the S4 system was not specifically disclosed in the ‘449 patent application and that it is 

prior art. The S4 system was designed by Mr. Vulpe and Mr. Owens in cooperation with Martin 

Hensel in 1992. S4 is a system for opening, displaying, editing, and storing documents containing 

SGML codes and content. See DX 2002 at 004-006. The S4 system was sold or offered for sale to 

Semiconductor Equipment and Materials International (“SEMI”) in California in 1992 and was put 

to use by February 1993. DX 2013; DX 2058; TT 5/15/09 p.m. at 17:5-11; TT 5/18/09 p.m. at 59:2- 

60:3. This was more than a year before the ‘499 patent application was filed. The parties dispute 

whether S4 was material to the ‘449 patent’s patentability because it taught the “metacode map” 

61


limitation and whether Mr. Vulpe had deceptive intent in failing to disclose the prior art. 

Materiality 

On April 1, 1997, the patent examiner rejected the claims of the application as anticipated 

by Kugimiya. See DX 2002 at 106-08. The examiner noted that Kugimiya disclosed “the claimed 

metacodes as tags, separating the tags from the words, locating and addressing them into a mapping 

table.” Id. at 108. In response, the applicants argued that Kugimiya did “nothing with the tags 

except keep them aside temporarily until they are needed to be re-inserted into the translated 

document.” Id. at 123. The claims were rejected again on September 16, 1997 as unpatentable over 

Kugimiya. Id. at 125-28. Finally, on December 10, 1997, Mr. Vulpe had an in person meeting with 

the patent examiner arguing that Kugimiya did not teach persistent separation of content and 

metacodes. TT 5/15/09 p.m. at 64:11-67:15. On January 13, 1998, the patent examiner allowed the 

claims and the patent issued See DX 2002 at 135-136; DX 2001. 

Microsoft’s expert, Mr. Gray, testified that S4 would anticipate or, in combination with 

Kugimiya, render the ‘449 patent obvious because it disclosed a method of persistently storing a 

metacode map separating metacodes from content. TT 5/20/09 at 112:1-123:13, 124:15-19. As 

discussed, the source code of S4 was destroyed and unavailable for trial. Therefore, in making this 

conclusion, Mr. Gray relied on screen shots in the S4 user manual to determine that the separation 

between content and metacodes was persistent. TT 5/18/09 p.m. at 164:5-16; TT 5/18/09 p.m. at 

164:5-16; 5/18/09 at 165:13-173:14; 5/20/09 at 126:2-127:3; DX 2202 at 111-113. Contrarily, i4i 

presented evidence that it was impossible to show that content and metacodes were persistently 

separated in a data structure through a user manual and non-technical testimony. TT 5/19/09 p.m. 

at 51:13-54:24; TT 5/18/09 a.m. at 78:5-14, 87:14-21; TT 5/13/09 p.m. at 23:6-24. To support this 

62

testimony, Mr. Vulpe testified that he had not conceived of persistent separation of metacodes and 

content until late 1993. 5/11/09 p.m. at 111:10-112:25, 159:10-20. In fact, he testified that S4 stored 

content and metacodes together. 5/15/09 p.m. at 89:13-90:19, 90:20-22. There was additional 

testimony that S4 intermingled content and metacodes. TT 5/11/09 p.m. at 157:12-24, 170:22- 

171:19; TT 5/18/09 p.m. at 57:11-17, 71:8-10, 74:16-75:10; TT 5/15/09 p.m. at 107:22-108:2. 

The testimony over whether S4 contained a metacode map was clearly conflicting. However, 

in light of the highly specific and detailed testimony regarding other prior art during the remainder 

of the trial, Mr. Gray’s testimony regarding S4 was simply unpersuasive. A user’s manual and 

screen shots of a product do not reveal anything about its underlying programing, and Mr. Gray did 

not testify regarding how they might. There was also ample evidence to support a conclusion that 

S4 did not contain a metacode map. The jury rejected Mr. Gray’s testimony in rendering its verdict 

of validity. Again, Microsoft has failed to prove by clear and convincing evidence that S4 was 

material to the patentability of the ‘449 patent. 

Intent 


Of course, the fact that Microsoft has failed to prove materiality counsels against finding that 

Mr. Vulpe had a deceptive intent in failing to disclose S4. A lesser showing of materiality requires 

a greater showing of intent. See Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309, 1313 

(Fed. Cir. 2006). In order to create an inference of deceptive intent, Microsoft must prove that Mr. 

Vulpe knew or should have known of S4's materiality. Praxair, 543 F.3d at 1313-1314. 

Microsoft relies on two pieces of evidence to show deceptive intent. First, in 1994, after the 

‘449 patent application was filed and two years after S4 was delivered, Mr. Vulpe sought funding 

from the Canadian Government and submitted an application to that effect. He submitted a proposal 

63


that, in part, spoke of the ‘449 patent application and represented that “[t]he initial implementation 

is embedded into [i4i’s] S4 product.” DX 2395.001. Further, Mr. Vulpe submitted a letter to 

potential investors that stated “[t]he basis of the patent and preliminary work on the validation 

precedes [i4i].” DX 2051; TT 5/20/09 a.m. at 170:19-171:11. Mr. Vulpe admitted on the stand that 

he lied to investors about the creation date of the ‘449 patent. TT 5/15/09 p.m. at 35:24-36:19. 

There is also no doubt that Mr. Vulpe understood his obligation to the PTO. TT 5/11/09 p.m. at 

163:11-167:11. 

However, there was testimony that “S4” had continued to develop through 1994 and beyond. 

TT 5/15/09 a.m. at 139:2-142:10; PX 626. Though the product retained the same name, i4i contends 

that it began to integrate the ‘449 patented invention over time. TT 5/15/09 p.m. at 92:12-95:10; TT 

5/15/09 a.m. at 138:18-139:9. There is also other documentary evidence supporting the explanation 

that S4 was under constant development in multiple iterations over a substantial period of time. TT 

5/15/09 a.m. at 126:3-8, 127:4-7; PX 627 at i4i107100. The documentary evidence further supports 

a conclusion that Mr. Vulpe considered the 1992 S4 and the post-application S4 very different 

products. TT 5/15/09 a.m. at 129:2-6. 

Ultimately, Microsoft failed to clearly show Mr. Vulpe’s deceptive intent to the PTO. 

Though Mr. Vulpe’s credibility is questionable with regard to certain investors, the totality of 

evidence supports a conclusion that Mr. Vulpe was candid with the PTO and never considered the 

early version of S4 relevant or vital to the ‘449 patent application. Considering that the evidence of 

materiality is also lacking, Microsoft cannot meet its high burden regarding intent. As a result, the 

Court does not find that the ‘449 patent is invalid on the basis of inequitable conduct. 

64


CONCLUSION 

For the aforementioned reasons, i4i’s motion for enhanced damages and attorneys’ fees is 

GRANTED in part, i4i’s motion for permanent injunction is GRANTED, i4i’s motion for post 

verdict damages, prejudgment interest, and post-judgment interest is GRANTED, and all other 

motions are DENIED. The permanent injunction provided for herein will be memorialized in a 

separate order. 

So ORDERED and SIGNED this 11th day of August, 2009. 

__________________________________ 

LEONARD DAVIS 

UNITED STATES DISTRICT JUDGE 

65

United States Court of Appeals for the Federal Circuit 

2008-1485, -1487, -1495 

LUCENT TECHNOLOGIES, INC., 

and 

Plaintiff/Counterclaim Defendant- 

Cross Appellant, 

LUCENT TECHNOLOGIES GUARDIAN I LLC, 

and 

Counterclaim Defendant, 

MULTIMEDIA PATENT TRUST, 

v. 

Plaintiff/Counterclaim Defendant, 

GATEWAY, INC., GATEWAY COUNTRY STORES LLC, 

GATEWAY COMPANIES, INC., COWABUNGA ENTERPRISES, INC., 

and GATEWAY MANUFACTURING LLC, 

and 

DELL INC., 

and 

Defendants/Counterclaimants, 

Defendant/Counterclaimant, 


Defendant/Counterclaimant-Appellant.

John M. Desmarais, Kirkland & Ellis, LLP, of New York, New York, argued for 

plaintiff/counterclaim defendant-cross appellant Lucent Technologies, Inc. With him on the 

brief were Paul A. Bondor and Michael P. Stadnick. 

Constantine L. Trela, Jr., Sidley Austin LLP, of Chicago, Illinois, argued for 

defendant/counterclaimant-appellant Microsoft Corporation. With him on the brief were 

Robert N. Hochman and Tacy F. Flint, and Carter G. Phillips, of Washington, DC. Of counsel 

on the brief were John E. Gartman and John W. Thornburgh, Fish & Richardson, P.C., of San 

Diego, California. Of counsel were Juanita Rose Brooks and Joseph P. Reid, Fish & 

Richardson, P.C. of San Diego, California; and Thomas Andrew Culbert and Stephen P. 

McGrath, Microsoft Corporation, of Redmond, Washington. 

Edward R. Reines, Weil, Gotshal & Manges LLP, of Redwood Shores, California, for 

amici curiae Apple Inc., et al. With him on the brief was Sonal N. Mehta. 

James W. Dabney, Fried, Frank, Harris, Shriver & Jacobson LLP, of New York, New 

York, for amici curiae Bank of America Corporation, et al. 

Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., of 

Washington, DC, for amici curiae 3M Company, et al. With him on the brief were Don O. 

Burley and Erik R. Puknys, of Palo Alto, California. Of counsel on the brief were Hansjorg 

Sauer, Biotechnology Industry Organization, of Washington, DC; Michael J. Biber, Dolby 

Laboratories, Inc., of San Francisco, California; P. Michael Walker and Barry Estrin, E.I. 

DuPont de Nemours and Co., of Wilmington, Delaware; Richard F. Phillips, Exxon Mobil 

Chemical Company, of Houston, Texas; Buckmaster de Wolf, General Electric Company, of 

Fairfield, Connecticut; Philip S. Johnson, Johnson & Johnson, of New Brunswick, New 

Jersey; Steven W. Miller, The Procter & Gamble Company, of Cincinnati, Ohio; Alexander H. 

Rogers, Qualcomm Inc., of San Diego, California; and Taraneh Maghamé, Tessera, Inc., of 

San Jose, California. 

Appealed from: United States District Court for the Southern District of California 

Judge Marilyn L. Huff 

2

United States Court of Appeals for the Federal Circuit 

2008-1485, -1487, -1495 

LUCENT TECHNOLOGIES, INC., 

and 

Plaintiff/Counterclaim Defendant- 

Cross Appellant, 

LUCENT TECHNOLOGIES GUARDIAN I LLC 

and 

Counterclaim Defendant, 

MULTIMEDIA PATENT TRUST, 

v. 

Plaintiff/Counterclaim Defendant, 

GATEWAY, INC., GATEWAY COUNTRY STORES LLC, 

GATEWAY COMPANIES, INC., COWABUNGA ENTERPRISES, INC., 

and GATEWAY MANUFACTURING LLC, 

and 

DELL, INC., 

and 


Defendants/ Counterclaimants, 

Defendant/Counterclaimant, 

Defendant/Counterclaimant-Appellant. 

Appeals from the United States District Court for the Southern District of California in 

case no. 07-CV-2000, Judge Marilyn L. Huff.

__________________________ 

DECIDED: September 11, 2009 

__________________________ 

Before MICHEL, Chief Judge, NEWMAN and LOURIE, Circuit Judges. 

MICHEL, Chief Judge. 

Microsoft Corporation appeals the denial of post-trial motions concerning a jury 

verdict that U.S. Patent No. 4,763,356 (the “Day patent”) was not invalid and that 

Microsoft indirectly infringed the Day patent. Microsoft also appeals the 

$357,693,056.18 jury award to Lucent Technologies, Inc. for Microsoft’s infringement of 

the Day patent. Because the validity and infringement decisions were not contrary to 

law and supported by substantial evidence, we affirm. Because the damages 

calculation lacked sufficient evidentiary support, we vacate and remand that portion of 

the case to the district court for further proceedings. 

BACKGROUND 

In the 1970s, niche groups of hobbyists, including two teenagers in a Los Altos 

garage, built personal computers from scratch. In the early to mid-1980s, personal 

computing gained popularity although still in its infancy. In 1982, a fifteen-year-old high 

school student created the first public computer virus, spreading it among personal 

computers via floppy disks, most likely the 5¼-inch version, as the 3½-inch disk wasn’t 

introduced until a few years later. Commercially available operating systems at the time 

were mainly text-based with few, if any, graphical interfaces. In 1984, with its now 

famous “1984” commercial aired during Super Bowl XVIII on Black Sunday, Apple 

Computer announced the introduction of its Apple Macintosh, the first widely sold 

2008-1485, -1487, -1495 2

personal computer employing a graphical user interface. The following year, Microsoft 

introduced its own version of a graphical operating system, Windows 1.0. 

In December 1986, three computer engineers at AT&T filed a patent application, 

which eventually issued as the Day patent. The patent is generally directed to a method 

of entering information into fields on a computer screen without using a keyboard. A 

user fills in the displayed fields by choosing concurrently displayed, predefined tools 

adapted to facilitate the inputting of the information in a particular field, wherein the 

predefined tools include an on-screen graphical keyboard, a menu, and a calculator. 

The system may display menus of information for filling in a particular field and may also 

be adapted to communicate with a host computer to obtain the information that is 

inserted into the fields. In addition, one of the displayed fields can be a bit-mapped 

graphics field, which the user fills in by writing on the touch screen using a stylus. 

In 2002, Lucent 1 initiated the present action against Gateway, and Microsoft 

subsequently intervened. The appeal comes from the consolidated action of three 

separate infringement suits filed in the Eastern District of Virginia, the District of 

Delaware, and the Southern District of California. The consolidated action was 

originally before Senior Judge Rudi Brewster. In October 2007, Judge Brewster 

severed part of the patent infringement case for transfer to Judge Marilyn Huff. The 

court severed and transferred for further proceedings all matters relating to the Day 

patent and U.S. Patent Nos. 4,383,272; 4,958,226; 5,347,295; and 4,439,759. 

At trial, Lucent charged infringement by Microsoft of claims 19 and 21, among 

others, of the Day patent. Lucent alleged indirect infringement of claim 19 based on the 

1 The Day patent is now assigned to Lucent. 

2008-1485, -1487, -1495 3

sales and use of Microsoft Money, Microsoft Outlook, and Windows Mobile. As to 

claim 21, Lucent asserted that the use of Windows Mobile infringed. Lucent also 

alleged infringement by Dell and asserted claims of the other patents as well, but those 

issues are not on appeal. 2 Microsoft challenged Lucent’s infringement contentions, 

contending among other defenses that the Day patent was invalid for being anticipated 

or obvious and, even if valid, Microsoft’s sales of its products did not infringe the Day 

patent. 

The jury found Microsoft liable on claim 19 as to all three products and on 

claim 21 as to Windows Mobile but returned a finding of no infringement by Dell as to 

those two claims. The verdict, without distinguishing among the three products or 

between inducement and contributory infringement, awarded a single lump-sum against 

Microsoft for all products involved. The jury awarded $357,693,056.18 for Microsoft’s 

infringement of the Day patent, excluding prejudgment interest. 3 

The parties filed numerous post-trial motions, including Microsoft’s renewed 

motions seeking judgment as a matter of law that the Day patent was anticipated and 

obvious and motions challenging the jury’s finding of infringement and the jury’s award 

of damages. In particular, Microsoft sought judgment as a matter of law that claims 19 

and 21 were anticipated under 35 U.S.C. § 102(b) and (g) or were obvious under § 103. 

The district court found substantial evidence in the record to support the jury’s 

determination that the defendants had not proven the Day patent to be invalid. The 

district court also held that neither judgment as a matter of law nor a new trial was 

2 Additionally, on December 15, 2008, Microsoft and Lucent filed a 

stipulation dismissing all claims between them except those relating to the Day patent. 

3 For U.S. Patent No. 5,347,295, the jury awarded $10,350,000.00 for 

Microsoft’s infringement and $51,000.00 for Dell’s infringement. 

2008-1485, -1487, -1495 4

appropriate on the jury’s finding that Lucent had proven damages in the amount of 

approximately $358 million. The district court granted only the post-trial motion setting 

aside the obviousness verdict concerning U.S. Patent No. 4,958,226 but denied all 

other post-trial motions, including those for the Day patent. See Lucent Techs., Inc. v. 

Gateway, Inc., 580 F. Supp. 2d 1016 (S.D. Cal. 2008). Microsoft has timely appealed 

the district court’s decision. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1). 

I. Standards of Review 

ANALYSIS 

When reviewing the denial of a motion for judgment as a matter of law (“JMOL”) 

after a jury verdict, we ‘“appl[y] the same standard of review as that applied by the trial 

court.’” Wechsler v. Macke Int’l Trade, Inc., 486 F.3d 1286, 1290 (Fed. Cir. 2007) 

(quoting nCube Corp. v. SeaChange Int’l, Inc., 436 F.3d 1317, 1319 (Fed. Cir. 2006)). 

Furthermore, “[t]he grant or denial of a motion for judgment as a matter of law is a 

procedural issue not unique to patent law, reviewed under the law of the regional circuit 

in which the appeal from the district court would usually lie.” Summit Tech., Inc. v. 

Nidek Co., 363 F.3d 1219, 1223 (Fed. Cir. 2004). In the Ninth Circuit, a district court 

grants JMOL only “if the evidence, construed in the light most favorable to the 

nonmoving party, permits only one reasonable conclusion, and that conclusion is 

contrary to the jury’s verdict.” Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002). 

Similarly, a district court in the Ninth Circuit “may grant a new trial only if the verdict is 

against the clear weight of the evidence.” Id. 

“Infringement is a question of fact, reviewed for substantial evidence when tried 

to a jury.” Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1332 (Fed. Cir.), 

2008-1485, -1487, -1495 5

cert. denied, 129 S. Ct. 754 (2008). Obviousness is a legal question reviewed de novo. 

PharmaStem Therapeutics, Inc. v. ViaCell, Inc., 491 F.3d 1342, 1359 (Fed. Cir. 2007), 

cert. denied, 128 S. Ct. 1655 (2008). The statutory standard requires us to decide 

whether the subject matter of the claimed invention ‘‘would have been obvious at the 

time the invention was made to a person of ordinary skill in the art to which [the subject 

matter of the invention] pertains.” 35 U.S.C. § 103(a) (2006); see also KSR Int’l Co. v. 

Teleflex Inc., 550 U.S. 398, 415-16 (2007). “Underpinning that legal issue are factual 

questions relating to the scope and content of the prior art, the differences between the 

prior art and the claimed invention, the level of ordinary skill in the art, and any relevant 

secondary considerations, such as commercial success, long-felt need, and the failure 

of others.” PharmaStem, 491 F.3d at 1359. 

We review for an abuse of discretion a district court’s decision concerning the 

methodology for calculating damages. Unisplay, S.A. v. Am. Elec. Sign Co., 69 F.3d 

512, 517 n.8 (Fed. Cir. 1995); see also State Indus., Inc. v. Mor-Flo Indus., Inc., 

883 F.2d 1573, 1576-77 (Fed. Cir. 1989) (noting that the precise methodology used in 

“assessing and computing damages is committed to the sound discretion of the district 

court”). We review the jury’s determination of the amount of damages, an issue of fact, 

for substantial evidence. SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 

1161, 1164 n.2 (Fed. Cir. 1991). “A jury’s decision with respect to an award of damages 

‘must be upheld unless the amount is grossly excessive or monstrous, clearly not 

supported by the evidence, or based only on speculation or guesswork.’” State 

Contracting & Eng’g Corp. v. Condotte Am., Inc., 346 F.3d 1057, 1072 (Fed. Cir. 2003) 

2008-1485, -1487, -1495 6

(quoting Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1580 

(Fed. Cir. 1992)). 

II. Invalidity 

Before the jury, Microsoft engaged in a multi-pronged attack of the Day patent’s 

validity. Microsoft argued, for example, that the Day patent was anticipated under 

§ 102(b) and (g) and obvious under § 103. On appeal, Microsoft challenges only the 

district court’s denial of the JMOL motion on obviousness. Microsoft does not challenge 

any of the district court’s claim constructions. In analyzing the obviousness defense, we 

therefore must apply the claim construction as it was presented to the jury. Further, 

Microsoft relies on only a single prior art document for its obviousness position with 

respect to claim 19. 

Independent claim 19 is directed to a method of inputting data using certain 

predefined “tools” and entering that information into particularfields displayed in a 

computer form. Claim 21 depends from claim 19 and further specifies that the 

information field is displayed as “a bit-mapped-graphics field.” Claims 19 and 21 read in 

full as follows. 

19. A method for use in a computer having a display comprising the steps 

of 

displaying on said display a plurality of information fields, 

identifying for each field a kind of information to be inserted therein, 

indicating a particular one of said information fields into which information 

is to be inserted and for concurrently displaying a predefined tool 

associated with said one of said fields, said predefined tool being operable 

to supply information of the kind identified for said one field, said tool 

being selected from a group of predefined tools including a tool adapted to 

supply an individual entry from a menu of alternatives and at least a tool 

adapted to allow said user to compose said information, and 

inserting in said one field information that is derived as a result of said 

user operating said displayed tool. 

2008-1485, -1487, -1495 7

* * * 

21. The method set forth in claim 19 wherein the step of displaying said 

pattern includes the step of displaying one or more of said information 

fields as a bit-mapped-graphics field. 

The ‘356 patent, col.17 l.27 to col.18 l.22. Figure 5 of the Day patent, shown below, 

illustrates an embodiment of the invention in which a graphical calculator overlays the 

form having multiple fields, one of which—“Quantity” (Qty 61)—is highlighted. 

A. Claim 19 

Microsoft’s position was that claim 19 would have been obvious over a 1984 

magazine article, Michael Tyler, Touch Screens: Big Deal or No Deal?, Datamation, 

Jan. 1984, at 146 (“the Datamation article” or “Datamation”). The article describes both 

the potential benefits and drawbacks of using computer touch screens at a time when 

computer technology was developing. As Datamation reports, analysts feared that 

“[t]he combination of these drawbacks and outside influences may doom the touch- 

sensitive terminal” and that “[e]ven touch technology’s greatest proponents admit that 

2008-1485, -1487, -1495 8

the future is not as bright as it once seemed.” Id. at 154. The Datamation article’s 

ultimate message was that “[t]ouch-sensitive terminals may be very sexy in the office, 

but whether they actually stimulate people to use computers is open to doubt.” Id. at 

146. 

Much of the trial testimony, as relating to the FXFE system 4 in the Datamation 

article, described not what was in the article but what was allegedly prior art for 

purposes of prior public use or prior invention. The Datamation article’s entire 

disclosure relied upon by Microsoft on appeal is much more limited, namely one 

photograph 5 and the following two short paragraphs. 

The bank is in the process of implementing a two-phase strategy 

that it feels will accomplish the breakout [technology]. The plan employs 

Easel workstations programmed in the bank’s London office. Each 

workstation’s screen is divided roughly in half vertically. Large touchsensitive 

boxes at the top of the screen invite the user to declare the 

current transaction a “buy” or a “sell”; at the bottom, similar boxes let the 

users deal, service, cancel, log out, or lock out their screens. The right 

half of the screen lists key information about the current transaction, 

including buyer bank, seller bank, currency, exchange rate (in dollars and 

the foreign currency), broker, bank customer, exchange location, and 

method of payment. 

When the trader touches the screen in one of these areas, a list of 

potentially valid entries or a numeric keypad appears on the left half, 

inviting the user to choose the information needed on the right. For 

instance, when the user hits the “broker” cell on the right, a list of brokers 

appears on the left; the trader then hits the name of the broker to be 

involved in the current trade, and the information is entered into the 

system. For exchange rates and other numerical data, the user hits the 

proper cell on the right and then types in the numeric data on the keypad 

that appears on the left. In this way, an entire transaction can be 

completed directly on the workstation. (A QWERTY layout can be called 

4 In the Datamation article, the relevant computer system is referred to as 

Easel. Throughout trial and in the briefs, the system was called “FXFE,” although that 

name is based on information outside the article’s content. For ease of reference only, 

we use the FXFE terminology. 

5 The district court observed that the photograph in the Datamation article 

was “of limited clarity” and “limited in detail.” 580 F. Supp. 2d at 1032. 

2008-1485, -1487, -1495 9

up on the left for entry of nonstandard or rare names—an infrequently 

traded currency, for example.) 

Datamation, supra, at 148. 

During trial, the opposing experts for Microsoft and Lucent expressed conflicting 

views about the Datamation article’s disclosure. Specifically, the parties and their 

experts disagreed about whether the Datamation article described three of the 

limitations of claim 19 and whether a fourth limitation would have been obvious from the 

article. We address each limitation in turn. 

First, the experts expressed differing opinions about whether the Datamation 

article disclosed the limitation of “inserting in said one field information that is derived as 

a result of said user operating said displayed tool.” The district court construed this 

term to mean “inserting in a particular field information that is derived as a result of the 

user operating the displayed tool.” Lucent argues that all the Datamation article states 

is that the information is entered “into the system.” Microsoft counters that “[t]he article 

describes how an FXFE user entered (or ‘inserted’) information into what it calls ‘cells,’ 

another name for ‘information fields.’” But Microsoft’s expert was less than direct when 

asked whether the Datamation disclosed an information field, as required by claim 19: 

Q: And you told us the article had information fields in it, right? 

A: The article refers to fields as cells, and I think people understand a cell 

to be a field. 

Q: The article doesn’t use the word “information fields,” does it? 

A: I recall it using fields—using cells to represent fields, and I think what it 

was describing was a field. Whether it actually used the word “field,” 

I don’t know. I’d have to look at the article to see if it— 

Q: The article talked about a broker cell. It didn’t say that the information 

in the broker cell goes into a field, did it? You know it didn’t use that term, 

right? 

2008-1485, -1487, -1495 10

A: I don’t know that, but I—you would understand a cell to be a field. It 

was very clear from the article. 

Q: I know that you want to say that. What I’m asking you is what is 

actually in the article. You know as you sit here today that that article 

does not use the term “information field” in those words, true or false? 

A: I can’t answer that because I would have to look at it to see if it used 

field, but when I read that article, it was clear to me what they were 

discussing was a field, and what’s demonstrated there is a field. Whether 

they used only cell and not field I’d have to actually look at the article. 

Q: So can we agree that as you sit here today in the stand you don’t 

know? 

A: Well, I’ve read the article, but I haven’t done an analysis on whether the 

word “field” actually shows up into that—in that article. 

J.A. 08112-13. 

Microsoft’s expert seemed to equate the “information field” of claim 19 with the 

term “cell,” as used in the Datamation article. What the article describes as a “cell,” 

however, appears to be different from an “information field,” as used in the claim of the 

Day patent. The article states that “when the user hits the ‘broker’ cell on the right, a list 

of brokers appears on the left.” Datamation, supra, at 148. In the next stage of the 

transaction, the user could select from the “list of brokers appear[ing] on the left” and 

“the trader hits the name of the broker.” Id. This sequence could be viewed as 

occurring without inserting an entry into an information field. Also, a reasonable jury 

could have understood “cell” to mean an area on the screen that a user touches to 

proceed to the next stage in the transaction and not an on-screen box in which entered 

data is displayed, i.e., an information field. The Day patent requires an information field. 

It’s entirely possible—and reasonable—for the jury to have concluded that the 

Datamation article describes a computer system operating as a data input system 

without the creation of on-screen forms having information fields, as required by 

claim 19. The photograph shows nothing about whether data is entered into a field and 

2008-1485, -1487, -1495 11

thus displayed on the screen. The photograph does not depict anything resembling an 

“information field.” A reasonable jury could have concluded that the FXFE system’s 

process consisted of a user entering data, the system receiving that data, and the 

system then proceeding to the next operation in the process, without displaying the data 

in an information field on the screen. For instance, consider a sequence routinely 

employed by an automated teller machine (ATM). When withdrawing money from one’s 

checking account (e.g., $50, $100, or $200), a user presses the appropriate on-screen 

button, the ATM system receives the input, and then the system proceeds to the next 

decisional operation (e.g., print receipt?). In this sequence, the system never enters 

and displays the user’s selection into a field on the computer screen. 

Although the Datamation article possibly describes a system capable of inserting 

data into an information field, the article itself does not appear to teach that step. Of 

singular importance here, however, is that the jury could have reasonably viewed the 

Datamation article as not disclosing the “inserting” step. 

The second limitation in dispute is the “tool” limitation. Claim 19 requires a “tool 

adapted to allow said user to compose said information.” The district court interpreted 

this limitation to mean “a graphical keyboard tool or a graphical number keypad tool, 

which allows the user to compose information by pointing to the display keys of that 

tool.” 

Microsoft again contends that the Datamation article necessarily discloses this 

“tool” limitation. Reasoning that the keyboard in the Datamation photograph is graphical 

because it is a “pictorial” image on the screen, Microsoft relies on testimony from an 

expert, who told the jury, “So when you’re talking about something graphical, you’re 

2008-1485, -1487, -1495 12

talking about a pictorial representation that’s displayed on the computer screen.” This 

testimony, Microsoft asserts, is evidence sufficient to overturn the jury’s verdict. 

The jury also heard a different view from Lucent’s expert, who explained the 

difference between a computer’s “text mode” and “graphics mode.” Lucent’s expert 

opined that “[t]here’s no evidence that the FXFE system was anything other than a text- 

based system.” He further testified as followed: 

Q: Now, you told us this system is not a graphical system. What did you 

mean by that? 

A: This is—this program was written in text mode. Graphics mode on 

computers of this era was too slow to support productivity applications, 

which is what this is. So developers uniformly—I mean, there may have 

been a rare exception, but with the exception of people who needed to 

work in graphics such as allowing people to draw, these programs were 

built in text mode. 

And what text mode means is that the only control a programmer has is to 

say I want the letter A, I want the number zero, I want an exclamation 

point, I want an underscore and so forth. And even the microprocessor 

doesn’t have control. There’s a piece of hardware out there that’s just 

putting characters on a screen. 

So it’s text mode, it’s not graphics mode. The 356 [Day] patent is all about 

graphics mode. 

Q: In fact, the Court’s construction for the composition tool says it has to 

be a graphical keypad tool. 

A: That’s correct. 

Q: And this isn’t even a graphical system. 

A: No, it’s not. 

J.A. 08658-59. 

Microsoft’s own expert seemingly admitted that the Datamation article did not 

necessarily disclose a system operating in graphics mode: 

Q: And the article doesn’t tell us that this system operated in graphics 

mode as we understand that term to mean where you’re addressing 

information to individual pixels, right? The article doesn’t say that? 

2008-1485, -1487, -1495 13

A: Well, the article does describe that it had a very high resolution, 976 

pixels by some other resolution, which indicates to me that it operated in— 

it could operate in a graphics mode. 

Q: I’m not asking you if it could. The article does not use the phrase 

“graphics mode,” does it? 

A: I don’t think the article describes whether it worked in graphics mode or 

not. 

J.A. 08112. Based on this evidence, the jury was within its charge to conclude that the 

Datamation article did not disclose “a graphical keyboard tool or a graphical number 

keypad tool.” 

The third disputed limitation is “concurrently displaying a predefined tool 

associated with said one of said fields.” The district court’s construction requires this 

phrase to mean “displaying at the same time, as by a window overlaying the form.” 

Microsoft contends that “[t]he Datamation article leaves no doubt that the FXFE 

system’s graphical tools are displayed at the same time as the information fields.” 

Lucent responds that Microsoft is impermissibly trying to broaden the scope of the claim 

by eliminating a requirement that the window overlays the form. 

As noted above, Microsoft did not object to the claim construction read to the 

jury, and does not appeal the claim construction to us. Based on the claim construction 

presented, the jury reasonably could have concluded that the Datamation article does 

not disclose a graphical tool that overlayed the form. Microsoft’s expert conceded that 

the Datamation article doesn’t describe a tool that overlays a form. 

Q: The article does not discuss tools overlaying a form, true? 

A: I don’t think it describes it that way, no. Right. 

Q: In fact, the keyboard does not overlay the form in the—in the article. It 

would have been wrong if it described it that way, right? 

2008-1485, -1487, -1495 14

A: Yes, the—as I told you on my direct, the tools were on the left side of 

the screen. 

J.A. 08112. From this testimony and the photograph “of limited clarity” in the 

Datamation article, the jury was permitted to conclude, as a factual matter, that the 

article did not disclose this limitation. Microsoft offers nothing to fill this gap in its 

obviousness analysis. 

Instead, Microsoft argues to us that the jury applied the wrong claim construction 

requiring an overlayed tool. Microsoft asserts that the claim construction given by the 

district court mandates only the concurrent, or simultaneous, display of the “predefined 

tool” and the “one of said fields.” This argument is unpersuasive, however. First, 

reading the claim construction as Microsoft does would render superfluous the phrase 

“as by a window overlaying the form.” If the proper claim application were as Microsoft 

argues it to be, the “as by” phrase is completely unnecessary. Second, as noted, 

Microsoft does not challenge the claim construction. If Microsoft believed that the 

proper claim construction does not require the tool to overlay the form, Microsoft should 

have argued for such a claim construction instead of disputing the jury’s reasonable 

application of the claim construction as given to the jury. 

The fourth limitation in dispute is the “indicating” step. Unlike the previous three 

claim limitations, the parties agree that the Datamation article does not explicitly 

disclose the limitation of “indicating a particular one of said information fields into which 

information is to be inserted.” Microsoft’s expert conceded that the Datamation article 

doesn’t teach this limitation. 

Moreover, both parties agree that “indicating” includes highlighting the 

information field or placing a cursor in the information field so the user knows which field 

2008-1485, -1487, -1495 15

“into which information is to be inserted.” According to Microsoft, “failing to indicate 

which field information is being entered into—that is, having information show up 

randomly somewhere on the screen—would be contrary to all experience and common 

sense.” We disagree. In many instances perhaps, it may make sense to highlight a 

field into which information is entered. But, when examined in the context of the 

Datamation article’s description, we understand how the jury could conclude otherwise. 

As noted above, the Datamation article doesn’t explicitly describe the entering of 

information into onscreen fields. Assuming the article did, it does not necessarily lead 

one of skill in the art to have a reason to “indicate” the field into which information is 

entered. The jury could have reasonably viewed the Datamation system as displaying 

only one onscreen information field. Nothing in the article appears to suggest that the 

FXFE system displays—or is capable of displaying—multiple information fields at the 

same time. To the contrary, the system is described as proceeding from the entry of 

one type of data to the next. See Datamation, supra, at 148. Having agreed with this 

description, the jury could have also concluded that an ordinarily skilled artisan would 

not have had a reason to “indicate” the only field on the computer screen. If there is 

only one field displayed on the screen, the user knows that any data will be entered into 

that single field. Specifying the only field by highlighting would not have helped the user 

in any way, or at least a jury could have so concluded, based on the evidence adduced 

at trial. 

Having examined the four contested claim limitations, the jury would have been 

within its reasonable boundaries in finding the Datamation article to be lacking at least 

one of the limitations and in concluding that no sufficient reason existed to modify the 

2008-1485, -1487, -1495 16

prior art. When the underlying facts are taken in the light most favorable to Lucent, the 

non-moving party, the evidence reasonably permitted the jury to have decided that 

Microsoft did not prove by clear and convincing evidence that claim 19 would have been 

obvious. Accordingly, the district court did not err when it denied Microsoft’s motion for 

judgment as a matter of law concerning the validity of claim 19. 

B. Claim 21 

Microsoft’s invalidity position for claim 21 fares no better. Claim 21 requires that 

“the step of displaying said pattern includes the step of displaying one or more of said 

information fields as a bit-mapped-graphics field.” The district court construed 

“bit-mapped graphics field” to refer to “a field into which a user is to enter information by 

writing on a touch sensitive screen using a stylus.” 

Microsoft argues that claim 21 would have been obvious in light of Datamation 

alone, contending that the article “describes FXFE’s touch sensitive screen as able to 

‘accept a finger, a pen, or any other device.’” The Datamation article, under Microsoft’s 

reading, “inherently disclos[es] the ability to enter information by writing on the screen 

with a stylus.” What Microsoft misapprehends is that the disclosed FXFE system can 

accept the touch of a pen or any other device. The Datamation article does not teach a 

computer system that can accept “information by writing on a touch sensitive screen 

using a stylus.” 

Microsoft also asserts that claim 21 would have been obvious over Datamation in 

view of other prior art teaching the process of capturing on-screen handwriting. This 

argument is not sufficient to overturn the jury’s verdict. Nothing in the Datamation 

article itself discloses a reason why on-screen handwriting, e.g., by writing with a stylus, 

2008-1485, -1487, -1495 17

could or should be used with the FXFE system. Rather, much of the Datamation article 

appears to teach away from the inclusion of “a field into which a user is to enter 

information by writing on a touch sensitive screen using a stylus.” The Datamation 

article quotes the Chemical Bank executive responsible for implementing the FXFE 

system as describing deficiencies with electronic pens: “We tried electronic pens, 

tablets, voice input, you name it. But the tablets demand too much precision on the part 

of the trader . . . .” Datamation, supra, at 148. 

The article also details the need for fast and efficient entry of trades, describing 

traders who “handle 1,000 trades a day, and often deal so quickly that they cannot write 

down all their trades on separate slips of paper.” Id. at 146. From this description, it’s 

understandable how the jury could have concluded that a skilled artisan would not have 

had a reason to combine the Easel system with a slower means of inputting information 

such as “writing on a touch sensitive screen using a stylus.” For these reasons, the 

district court did not err in denying Microsoft’s motion for JMOL that claim 21 would 

have been obvious. 

III. Infringement 

The jury found indirect infringement by Microsoft. Claims 19 and 21 are method 

claims; thus, Microsoft’s sales of its software alone cannot infringe the patent. 

Infringement occurs only when someone performs the method using a computer 

running the necessary software. Thus, Microsoft can only be liable for infringement of 

claims 19 and 21 as a contributor and/or an inducer. 

Microsoft makes the following arguments concerning indirect infringement. First, 

Lucent didn’t prove direct infringement, a necessary predicate for proving indirect 

2008-1485, -1487, -1495 18

infringement. Second, Lucent didn’t prove contributory infringement because the 

products have substantial noninfringing uses. Third, Lucent can’t prove inducement 

because the products are merely capable of inducing and Microsoft wasn’t shown to 

have the requisite intent to induce. We address each argument in turn. 

A. Direct Infringement 

To infringe a method claim, a person must have practiced all steps of the claimed 

method. See Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 775 (Fed. Cir. 1993) (“A method 

claim is directly infringed only by one practicing the patented method.”); see also 

35 U.S.C. § 271 (2006). Just as anticipation can be found by a single prior art use, a 

finding of infringement can rest on as little as one instance of the claimed method being 

performed during the pertinent time period. 

Lucent asserts that certain features of Outlook, Money, and Windows Mobile, 

when used, practice the methods of claims 19 and 21. For instance, Outlook includes a 

calendar tool that allows the user to enter dates in a form when preparing a record of an 

appointment. The tool displays a monthly calendar as a grid of numbered dates, along 

with graphical controls that allow the user to scroll to adjacent months or skip directly to 

a different month and year. Once the user defines a date with the tool, the software 

enters the numerical day, month, and year into the corresponding field in the 

appointment form. Similar to the number pad tool illustrated in the Day patent, 

Outlook’s calendar date-picker tool enables the user to select a series of numbers, 

corresponding to the day, month, and year, using graphical controls. This date-picker 

calendar tool is incorporated in a few of Outlook’s features. Microsoft Money and 

Windows Mobile have similar functionalities. 

2008-1485, -1487, -1495 19

According to Microsoft, Lucent failed to introduce any evidence that any 

customer actually used the claimed method in any of the Microsoft products. Noting 

that “each accused product has numerous uses that do not involve forms with onscreen 

composition tools” and that “the specific narrow function of the patented method—filling 

in a form—can be performed without using the asserted ‘composition tool’ features,” 

Microsoft urges that “infringement is not inevitable.” The only evidence of direct 

infringement, in Microsoft’s view, is the testimony of Lucent’s expert. 

We agree with Microsoft that there was little, if any, direct evidence of 

infringement. Lucent’s expert testified on cross-examination as follows: 

Q: And you didn’t provide any evidence of anybody, any of Dell’s 

customers, for example, who actually performed all of the steps of the 

claims, right? 

A: Well, I can confess here and now that as a Dell customer, I did perform 

all steps of this claim many, many times. 

Q: When did you do it? 

A: Oh, back in—we’ve had Quicken on our Windows machines since 

around ’98 or ’99. So I’ve used that particular piece of software 

extensively using these tools. 

Q: These gentlemen sitting over here may want to talk to you after you get 

off the stand. 

A: I’m afraid they may. 

Q: But you didn’t produce any evidence to this jury that anybody other 

than Lucent’s trial team and its witnesses who actually performed every 

single step of the claim, is that fair? 

A: Again, my wife performed them all, so— 

J.A. 07517. As is evident, Microsoft correctly points out that Lucent’s direct evidence of 

infringement was limited. 

If that were the only evidence of performing the claimed method, we would likely 

have to reverse. Nevertheless, circumstantial evidence was just adequate to permit a 

jury to find that at least one other person within the United States during the relevant 

2008-1485, -1487, -1495 20

time period, other than the expert, had performed the claimed method. Lucent’s expert 

testified that “[i]t’s hard to imagine that we’re the only two people in the world that ever 

used it.” J.A. 07517. As Lucent notes “Microsoft not only designed the accused 

products to practice the claimed invention, but also instructed its customers to use the 

accused products in an infringing way.” 

An informative case is Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261 

(Fed. Cir. 1986), in which we affirmed a district court’s finding of direct infringement 

based on circumstantial evidence. In Moleculon, the district court held that the patentee 

“had met its burden of showing infringement under section 271(b) with circumstantial 

evidence of extensive puzzle sales, dissemination of an instruction sheet teaching the 

method of restoring the preselected pattern with each puzzle, and the availability of a 

solution booklet on how to solve the puzzle.” Id. at 1272. Similarly, in the present case, 

the jury reviewed evidence relating to the extensive sales of Microsoft products and the 

dissemination of instruction manuals for the Microsoft products. The jury also heard 

corresponding testimony from Lucent’s infringement expert. The circumstantial 

documentary evidence, supplementing the experts’ testimony, was just barely sufficient 

to permit the jury to find direct infringement by a preponderance of the evidence. As in 

Moleculon, the jury in the present case could have reasonably concluded that, 

sometime during the relevant period from 2003 to 2006, more likely than not one person 

somewhere in the United States had performed the claimed method using the Microsoft 

products. See Moleculon, 793 F.2d at 1272 (“It is hornbook law that direct evidence of 

a fact is not necessary. ‘Circumstantial evidence is not only sufficient, but may also be 

more certain, satisfying and persuasive than direct evidence.’” (quoting Michalic v. 

2008-1485, -1487, -1495 21

Cleveland Tankers, Inc., 364 U.S. 325, 330 (1960))); see also Alco Standard Corp v. 

Tenn. Valley Auth., 808 F.2d 1490, 1503 (Fed. Cir. 1986) (“Although the evidence of 

infringement is circumstantial, that does not make it any less credible or persuasive.”). 

In challenging the jury’s verdict, Microsoft contends that two cases control our 

review: ACCO Brands, Inc. v. ABA Locks Manufacturer Co., 501 F.3d 1307 (Fed. Cir. 

2007), and E-Pass Technologies, Inc. v. 3Com Corp., 473 F.3d 1213 (Fed. Cir. 2007). 

Although similar, these precedents differ enough from the facts of the present case, 

thus allowing the jury’s verdict to stand. In ACCO Brands, we held that a jury’s finding 

of induced infringement was not supported by substantial evidence. 501 F.3d at 1314. 

ACCO, the patentee, relied only on its expert’s testimony that the “natural and intuitive 

way to employ” the accused product, a computer lock, was in an infringing mode. Id. at 

1312. Importantly, however, ACCO’s expert “had no opinion” on the issue of “whether 

users other than himself used the lock in the infringing manner.” Id. at 1313. 

Furthermore, the locks were sold not only without instructions teaching the infringing 

method, but with instructions teaching the non-infringing use. Id. The jury also had no 

evidence suggesting that the U.S. distributor of the locks was aware of any infringing 

instructions. Id. 

In a similar vein, E-Pass does not compel the overturning of the jury’s verdict. 

There, the patentee tried to rely on “excerpts from the product manuals for various of 

the accused devices.” 473 F.3d at 1222. All the court had before it, however, was 

evidence “show[ing], at best, that the Palm defendants taught their customers each step 

of the claimed method in isolation.” Id. Thus, in both ACCO Brands and E-Pass, the 

patentees failed to introduce even circumstantial evidence of infringing acts. 

2008-1485, -1487, -1495 22

Microsoft also misreads our holding in Ball Aerosol & Specialty Container, Inc. v. 

Limited Brands, Inc., 555 F.3d 984 (Fed. Cir. 2009). There, we reversed the district 

court’s grant of summary judgment of infringement of a patent claiming a candle tin with 

a removable cover that also acts as a base for the candle holder. The issue in Ball 

Aerosol was one of claim construction rather than whether circumstantial evidence 

proved infringement. The patentee argued that “an apparatus patent claim with 

functional elements is infringed if the accused product is reasonably capable of being 

used without substantial modification in the manner recited in the claim.” Id. at 994. 

The patentee conceded that there was “no proof that the Travel Candle was ever placed 

in the infringing configuration.” Id. at 995. 

Without doubt, Lucent would have been on much firmer ground had it introduced 

some direct evidence of using the claimed method. Nevertheless, Lucent’s 

circumstantial evidence of infringement was “something less than the weight of the 

evidence,” Consolo v. Fed. Maritime Comm’n, 383 U.S. 607, 620 (1966), yet it was just 

“more than a mere scintilla,” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). 

Accordingly and for these reasons, we are not convinced that the district court erred in 

denying Microsoft’s JMOL motion with respect to infringement. For similar reasons, 

substantial evidence supports the jury’s finding as it relates to direct infringement by the 

use of Microsoft Money and Windows Mobile. 

Microsoft also complains that the infringement finding was erroneous because 

Microsoft Outlook does not contain a “composition tool.” 6 This argument likewise fails. 

A Lucent expert, Mr. Bruce Tognazzini, testified that the calendar tool in Outlook works 

6 

Microsoft does not dispute that both Money and Windows Mobile contain 

composition tools. 

2008-1485, -1487, -1495 23

y combining information to compose a complete date. He further explained that a 

composition tool is one that has “the ability to combine” information. A Microsoft expert, 

Mr. Dale Buscaino, appeared to concede this point as well, admitting that “a 

composition tool allows a user to put together parts.” Although most of Microsoft’s 

expert testimony disputed whether Outlook contained a composition tool, that testimony 

was insufficient to require a reasonable jury to find as a factual matter only 

noninfringement. 

B. Contributory Infringement 

Under 35 U.S.C. § 271(c), a party is liable for infringement if he “offers to sell or 

sells within the United States or imports into the United States . . . a material or 

apparatus for use in practicing a patented process, constituting a material part of the 

invention, knowing the same to be especially made or especially adapted for use in an 

infringement of such patent, and not a staple article or commodity of commerce suitable 

for substantial noninfringing use.” “In order to succeed on a claim of contributory 

infringement, in addition to proving an act of direct infringement, plaintiff must show that 

defendant ‘knew that the combination for which its components were especially made 

was both patented and infringing’ and that defendant’s components have ‘no substantial 

non-infringing uses.’” Cross Med. Prods., Inc. v. Medtronic Sofamor Danek, Inc., 

424 F.3d 1293, 1312 (Fed. Cir. 2005) (quoting Golden Blount, Inc. v. Robert H. 

Peterson Co., 365 F.3d 1054, 1061 (Fed. Cir. 2004)). 

According to Microsoft, Lucent did not prove contributory infringement because 

the products have substantial noninfringing uses. Lucent counters that the date-picker 

tool does not have any noninfringing uses. Thus, as framed by the parties, the main 

2008-1485, -1487, -1495 24

issue reduces to whether the “material or apparatus” is the entire software package or 

just the particular tool (e.g., the calendar date-picker) that performs the claimed method. 

If the former, then Microsoft prevails because the entire software package has 

substantial noninfringing uses. If the material or apparatus is the specific date-picker 

tool, then Lucent wins because that tool was “especially made or especially adapted for” 

practicing the claimed method. 

One example illustrates the problem with Microsoft’s approach. Consider a 

software program comprising five—and only five—features. Each of the five features is 

separately and distinctly patented using a method claim. That is, the first feature 

infringes a method claim in a first patent, the second feature infringes a method claim in 

a second patent, and so forth. Assume also that the company selling the software 

doesn’t provide specific instructions on how to use the five features, thus taking 

potential liability outside the realm of § 271(b). In this scenario, under Microsoft’s 

position, the software seller can never be liable for contributory infringement of any one 

of the method patents because the entire software program is capable of substantial 

noninfringing use. This seems both untenable as a practical outcome and inconsistent 

with both the statute and governing precedent. 

Similarly, if, instead of selling Outlook with the date-picker, Microsoft had offered 

the date-picker for sale as a separate download to be used with Outlook, there would be 

little dispute that Microsoft was contributing to infringement of the Day patent. As we 

explained in Ricoh Co. v. Quanta Computer Inc., 550 F.3d 1325, 1337 (Fed. Cir. 2008), 

cert. denied, 129 S. Ct. 2864 (2009), an infringer “should not be permitted to escape 

2008-1485, -1487, -1495 25

liability as a contributory infringer merely by embedding [the infringing apparatus] in a 

larger product with some additional, separable feature before importing and selling it.” 

Microsoft puts much reliance on Hodosh v. Block Drug Co., 833 F.2d 1575 

(Fed. Cir. 1987). Microsoft understands Hodosh to require “a focus on the product 

actually sold, not on a mere ingredient.” Under this view, Microsoft didn’t contribute to 

infringement because “[e]ach accused product had substantial noninfringing uses.” 

Instead, according to Microsoft, the district court “eviscerate[d] Hodosh and read[] 

‘substantial noninfringing use’ out of the statute.” 

But our court has previously rejected the interpretation of Hodosh urged by 

Microsoft on appeal: 

[T]his reading of Hodosh divorces the court’s holding from the facts upon 

which it was rendered. In focusing on “what was actually sold,” the 

Hodosh court rejected the argument that an otherwise infringing product 

may automatically escape liability merely because it contains a 

noninfringing staple ingredient . . . . It does not follow from Hodosh that 

the inclusion of a component with substantial noninfringing uses in a 

product that contains other components useful only to infringe a process 

patent can or should defeat liability for contributory infringement under 

§ 271(c). 

Ricoh, 550 F.3d at 1339-40. 

More importantly, Microsoft fails to appreciate the factual basis for Hodosh’s 

holding. In Hodosh, the patent at issue claimed “a method for desensitizing teeth with a 

composition containing an alkali metal nitrate.” 833 F.2d at 1576. The accused 

infringer sold toothpaste, e.g., “Sensodyne-F,” containing potassium nitrate, an alkali 

metal nitrate. Id.; see also Hodosh v. Block Drug Co., 786 F.2d 1136, 1137 (Fed. Cir. 

1986). The accused infringer argued that the sale of the toothpaste, which itself was 

not patented, could not constitute contributory infringement because the toothpaste 

contained a staple article, i.e., potassium nitrate. Hodosh, 833 F.2d at 1578. The court 

2008-1485, -1487, -1495 26

ejected this argument. While potassium nitrate, when sold in bulk form, was “a staple 

article or commodity of commerce suitable for substantial noninfringing use,” it was 

suitable only for the infringing use when sold as an ingredient in the toothpaste specially 

made to perform the patented method of desensitizing teeth. 

Here, the infringing feature for completing the forms, i.e., the date-picker tool, is 

suitable only for an infringing use. Inclusion of the date-picker feature within a larger 

program does not change the date-picker’s ability to infringe. Because Microsoft 

included the date-picker tool in Outlook, the jury could reasonably conclude, based on 

the evidence presented, that Microsoft intended computer users to use the tool— 

perhaps not frequently—and the only intended use of the tool infringed the Day patent. 

See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 932 (2005) 

(explaining that the contributory infringement doctrine “was devised to identify instances 

in which it may be presumed from distribution of an article in commerce that the 

distributor intended the article to be used to infringe another’s patent, and so may justly 

be held liable for that infringement”). 

Finally, Microsoft contends that § 271(c) is not applicable here. Relying solely on 

Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007), without further analysis, Microsoft 

contends that its “products are not a ‘material or apparatus’ as the statute requires for 

contributory infringement of patented methods.” We need only respond that the 

Supreme Court in Microsoft did not address the meaning of “material or apparatus” in 

§ 271(c). 

2008-1485, -1487, -1495 27

C. Inducing Infringement 

A party who “actively induces infringement of a patent shall be liable as an 

infringer.” 35 U.S.C. § 271(b). Under this provision, “[t]he plaintiff has the burden of 

showing that the alleged infringer’s actions induced infringing acts and that he knew or 

should have known his actions would induce actual infringements.” Manville Sales 

Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 (Fed. Cir. 1990), quoted in DSU Med. 

Corp v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc in relevant part). “[A] 

finding of inducement requires a threshold finding of direct infringement—either a 

finding of specific instances of direct infringement or a finding that the accused products 

necessarily infringe.” Ricoh, 550 F.3d at 1341 (citing ACCO Brands, 501 F.3d at 1313). 

“[I]nducement requires evidence of culpable conduct, directed to encouraging another’s 

infringement, not merely that the inducer had knowledge of the direct infringer’s 

activities.” DSU Med., 471 F.3d at 1306. A plaintiff may still prove the intent element 

through circumstantial evidence, just as with direct infringement, as discussed above. 

See id.; see also Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d 1368, 1377 

(Fed. Cir. 2005) (“A patentee may prove intent through circumstantial evidence.”); 

Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 668 (Fed. Cir. 1988) (“While proof of 

intent is necessary, direct evidence is not required; rather, circumstantial evidence may 

suffice.”). Evidence of active steps taken to induce infringement, such as advertising an 

infringing use, can support a finding of an intention for the product to be used in an 

infringing manner. DSU Med., 471 F.3d at 1305 (citing Grokster, 545 U.S. at 932). 

Microsoft argues that Lucent can’t prove inducement because the software 

products are merely capable of infringing and the evidence didn’t show the requisite 

2008-1485, -1487, -1495 28

intent to induce. As Microsoft sees it, “all Lucent has shown is that ‘hypothetical direct 

infringement’ might result if users choose particular options in each accused product.” 

Relying on DSU Medical and Kyocera Wireless Corp. v. International Trade 

Commission, 545 F.3d 1340 (Fed. Cir. 2008), Microsoft contends that 

Lucent presented only the same circumstantial evidence regarding the 

alleged possibility of using the accused products to infringe—marketing 

materials and help files—as evidence of intent to induce infringement of 

the Day patent. With regard to Outlook, for example, Lucent relied on 

materials generally describing Outlook’s use of forms and its calendar 

feature. No evidence showed that Microsoft encouraged use of the 

date-picker or even mentioned the date-picker specifically. With regard to 

Money, the evidence showed that Microsoft encouraged customers to 

enter information by downloading it from the Internet, which avoids 

manually filling out the transaction form. And for Windows Mobile, Lucent 

presented evidence of general instructions on how to use the product and 

statements promoting its general use of forms and ease of use. None of 

these materials induces customers to use a composition tool to fill out a 

computer-based form. 

Appellant Br. 52 (citations omitted). 

Lucent responds, asserting that “Microsoft both encouraged others to commit 

infringing acts and knew or should have known that its conduct would result in direct 

infringement.” Lucent cites its expert’s testimony as supporting the jury’s finding that 

“the infringing pop-up tool functionality is pervasive in the accused products; that the 

normal and intended operation of those products used the infringing functionality; and 

that Microsoft encouraged and intended users to infringe.” Lucent also argues that the 

evidence “established that onscreen pop-up tools are critical to the functionality of the 

accused products,” and that “Microsoft provided instruction, tutorials, and other 

materials directing users to operate the accused products in an infringing manner.” 

Having perused the evidence, we agree with Microsoft that the evidence is not 

strong, but we are not persuaded that the jury was unreasonable in finding that 

2008-1485, -1487, -1495 29

Microsoft possessed the requisite intent to induce at least one user of its products to 

infringe the claimed methods. With respect to inducing infringement with Outlook, 

Lucent points to the following testimony of its expert. 

Q: Does Microsoft intend users to use the forms and the different tools 

that we just looked at? 

A: Yes, definitely. It would be – you’d be unable to use the application and 

avoid forms. 

Q: So would you say then the form entry and the predefined tools of 

Microsoft Outlook form a material part of the limitations of claim 19 of the 

Day patent? 

A: Yes. 

Q: And the Outlook is specifically designed to use these forms and these 

predefined tools? 

A: Yes, it is. 

Q: Does Microsoft know that Outlook was designed to perform in that 

fashion? 

A: Yes. Again, they designed it. So they know they designed it to do that. 

J.A. 07441-42. At one point, Lucent’s infringement expert explained, on cross- 

examination, how certain Microsoft documentation encouraged users to use the 

infringing tool. 

Q: Okay. Let’s look at [the document]. Access shared team calendars in 

Outlook 2003. View multiple calendars side by side to make scheduling 

meetings fast and more convenient. 

A: Right. 

Q: Is it the part about scheduling meetings – 

A: That’s correct. 

Q: — that you now say is encouraging this method of Claim 19? 

A: Well, yeah. You schedule meetings using this appointment form. 

J.A. 07510. Additional circumstantial evidence lends further, albeit limited, support for 

the jury’s factual finding of intent. And our review reveals slightly stronger circumstantial 

evidence of intent concerning Windows Mobile and Microsoft Money. 

2008-1485, -1487, -1495 30

For these reasons, we affirm the district court’s denial of Microsoft’s motion for 

JMOL that Microsoft did not induce infringement of the Day patent. 

IV. Damages 

Based on the evidence of record, Microsoft (and Dell) sold approximately 

110 million units of the three software products capable of practicing the methods of the 

asserted claims. The total dollar value of the sales was approximately $8 billion. At 

trial, Lucent’s theory of damages was based on 8% of sales revenue for the accused 

software products, and it asked the jury to award $561.9 million based on Microsoft’s 

infringing sales. Microsoft countered that a lump-sum payment of $6.5 million would 

have been the correct amount for licensing the protected technology. See Lucent 

Techs., 580 F. Supp. 2d at 1042 & n.7. 

Microsoft challenges the jury’s damages award on several bases. First, 

Microsoft argues that the jury should not have applied the entire market value rule to the 

value of its three software products. Microsoft’s second argument for reversing the 

damages award is that, for method claims, Dynacore Holdings Corp. v. U.S. Philips 

Corp., 363 F.3d 1263 (Fed. Cir. 2004), requires that damages be limited to the proven 

number of instances of actual infringing use. Microsoft states that, “[u]nder Dynacore, 

Lucent had to tie its damages claim to demonstrated instances of direct infringement.” 

For the reasons stated below, we reject both arguments as presented by Microsoft. We 

agree, nevertheless, with Microsoft’s argument that substantial evidence does not 

support the jury’s verdict of a lump-sum royalty payment of $357,693,056.18. Further, 

to the extent the jury relied on an entire market value calculation to arrive at the 

2008-1485, -1487, -1495 31

lump-sum damages amount, that award is not supported by substantial evidence and is 

against the clear weight of the evidence. 

A. Reasonable Royalty 

“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 for the use made of the invention by the infringer, together with interest and 

costs as fixed by the court.” 35 U.S.C. § 284. As the Supreme Court has framed the 

general issue of determining damages, at least for competitors, a court must ask, “[H]ad 

the Infringer not infringed, what would [the] Patent Holder[] have made?” Aro Mfg. Co. 

v. Convertible Top Replacement Co., 377 U.S. 476, 507 (1964); see also Pall Corp. v. 

Micron Separations, Inc., 66 F.3d 1211, 1223 (Fed. Cir. 1995) (“[T]he purpose of 

compensatory damages is not to punish the infringer, but to make the patentee whole.”). 

In the Supreme Court’s words, awarding damages through litigation attempts to assess 

“the difference between [the patentee’s] pecuniary condition after the infringement, and 

what his condition would have been if the infringement had not occurred.” Yale Lock 

Mfg. Co. v. Sargent, 117 U.S. 536, 552 (1886). 

The burden of proving damages falls on the patentee. Dow Chem. Co. v. Mee 

Indus., Inc., 341 F.3d 1370, 1381 (Fed. Cir. 2003); Kearns v. Chrysler Corp., 32 F.3d 

1541, 1551 (Fed. Cir 1994). Two alternative categories of infringement compensation 

are the patentee’s lost profits and the reasonable royalty he would have received 

through arms-length bargaining. See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 

575 F.2d 1152, 1157 (6th Cir. 1978) (Markey, J.). Lost profits are not at issue in the 

present case. A reasonable royalty is, of course, “merely the floor below which 

2008-1485, -1487, -1495 32

damages shall not fall.” Bandag, Inc. v. Gerrard Tire Co., 704 F.2d 1578, 1583 

(Fed. Cir. 1983). 

Litigants routinely adopt several approaches for calculating a reasonable royalty. 

The first, the analytical method, focuses on the infringer’s projections of profit for the 

infringing product. See TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 899 (Fed. Cir. 

1986) (describing the analytical method as “subtract[ing] the infringer’s usual or 

acceptable net profit from its anticipated net profit realized from sales of infringing 

devices”); see also John Skenyon et al., Patent Damages Law & Practice § 3:4, at 3-9 

to 3-10 (2008) (describing the analytical method as “calculating damages based on the 

infringer’s own internal profit projections for the infringing item at the time the 

infringement began, and then apportioning the projected profits between the patent 

owner and the infringer”). The second, more common approach, called the hypothetical 

negotiation or the “willing licensor-willing licensee” approach, attempts to ascertain the 

royalty upon which the parties would have agreed had they successfully negotiated an 

agreement just before infringement began. See Georgia-Pacific Corp. v. U.S. Plywood 

Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970); see also Rite-Hite Corp. v. Kelley Co., 

56 F.3d 1538, 1554 n.13 (Fed. Cir. 1995) (en banc); Radio Steel & Mfg. Co. v. MTD 

Prods., Inc., 788 F.2d 1554, 1557 (Fed. Cir. 1986) (“The determination of a reasonable 

royalty, however, is based not on the infringer’s profit, but on the royalty to which a 

willing licensor and a willing licensee would have agreed at the time the infringement 

began.”); Panduit, 575 F.2d at 1159 (“Among the relevant facts are: what plaintiff’s 

property was, to what extent defendant has taken it, its usefulness and commercial 

value as shown by its advantages over other things and by the extent of its use, and the 

2008-1485, -1487, -1495 33

commercial situation.” (citations and quotation marks omitted)). The hypothetical 

negotiation tries, as best as possible, to recreate the ex ante licensing negotiation 

scenario and to describe the resulting agreement. In other words, if infringement had 

not occurred, willing parties would have executed a license agreement specifying a 

certain royalty payment scheme. The hypothetical negotiation also assumes that the 

asserted patent claims are valid and infringed. 

In the present appeal, the parties, in offering the damages evidence, each 

adopted the hypothetical negotiation approach, without objection. Both Microsoft and 

Lucent must therefore accept that any reasonable royalty analysis “necessarily involves 

an element of approximation and uncertainty.” Unisplay, 69 F.3d at 517. We review the 

damages award within the Georgia-Pacific framework. 

Before the district court, Lucent asked for a damages award based only on a 

running royalty. Microsoft, on the other hand, told the jury that the damages should be 

a lump-sum royalty payment of $6.5 million. Based on the verdict form, the jury decided 

on a lump-sum award, not a running royalty. The verdict form notes a lump-sum 

damages amount and no amount (i.e., zero or “N/A”) on the lines for a running royalty. 

Faced with the jury’s selection, our task is to determine whether substantial evidence 

supports a lump-sum, paid-in-full royalty of approximately $358 million for Microsoft’s 

indirect infringement of the Day patent. To do this, we must decide whether substantial 

evidence supports the jury’s implicit finding that Microsoft would have agreed to, at the 

time of the hypothetical negotiation, a lump-sum, paid-in-full royalty of about 

$358 million. In performing this analysis, we focus mainly on the damages case as it 

applies to Microsoft Outlook, as infringement by the use of Outlook apparently 

2008-1485, -1487, -1495 34

constituted the vast majority of the award. We focus also on the relevant Georgia- 

Pacific factors, as presented to the jury through all the evidence and particularly the 

experts’ testimony. 

We also note the following at the outset of our analysis. Microsoft does not 

argue on appeal that any of the evidence relevant to the damages award was 

improperly before the jury. At times, Microsoft’s briefs seem to suggest that the district 

court judge “abdicated” her role as a gatekeeper. The responsibility for objecting to 

evidence, however, remains firmly with the parties. Here, the record reveals that, at 

trial, Microsoft objected neither to the introduction of any of the licenses discussed 

below nor to the testimony of Lucent’s expert as it related to those licenses. In this 

instance, the district court judge had no independent mandate to exclude any of that 

evidence. Therefore, we must accept that the licensing agreements and other evidence 

were properly before the jury. Any implicit objection on appeal is deemed waived by 

failing to object at trial. 

1. Factor 2 

The second Georgia-Pacific factor is “[t]he rates paid by the licensee for the use 

of other patents comparable to the patent in suit.” 318 F. Supp. at 1120. This factor 

examines whether the licenses relied on by the patentee in proving damages are 

sufficiently comparable to the hypothetical license at issue in suit. See Russell L. Parr, 

Royalty Rates for Licensing Intellectual Property 64 (2007) (“For similar license 

agreements to be used as a proxy for derivation of a fair market royalty, the form of 

license compensation should be on a like-kind basis.”). Subsumed within this factor is 

2008-1485, -1487, -1495 35

the question of whether the licensor and licensee would have agreed to a lump-sum 

payment or instead to a running royalty based on ongoing sales or usage. 

Significant differences exist between a running royalty license and a lump-sum 

license. In a standard running royalty license, the amount of money payable by the 

licensee to the patentee is tied directly to how often the licensed invention is later used 

or incorporated into products by the licensee. A running royalty structure shifts many 

licensing risks to the licensor because he does not receive a guaranteed payment. 

Royalties are dependent on the level of sales or usage by the licensee, which the 

licensee can often control. 

Compared to a running royalty analysis, a lump-sum analysis involves different 

considerations. A lump-sum license “benefits the patentholder in that it enables the 

company to raise a substantial amount of cash quickly and benefits the target [i.e., the 

licensee] by capping its liability and giving it the ability, usually for the remainder of the 

patent term, to actually use the patented technology in its own products without any 

further expenditure.” Richard F. Cauley, Winning the Patent Damages Case 47 (2009). 

The lump-sum license removes or shifts certain risks inherent in most arms-length 

agreements. A lump-sum license removes any risk that the licensee using the patented 

invention will underreport, e.g., engage in false reporting, and therefore underpay, as 

can occur with a running royalty agreement. Additionally, for both contracting parties, 

the lump-sum license generally avoids ongoing administrative burdens of monitoring 

usage of the invention. 

A further, important consideration is that an upfront, paid-in-full royalty removes, 

as an option for the licensee, the ability to reevaluate the usefulness, and thus the 

2008-1485, -1487, -1495 36

value, of the patented technology as it is used and/or sold by the licensee. As generally 

employed, once a lump-sum license is duly executed, the licensee is obligated to pay 

the entire, agreed-upon amount for the licensed technology, regardless of whether the 

technology is commercially successful or even used. A licensee to a lump-sum 

agreement, under usual licensing terms, cannot later ask for a refund from the licensor 

based on a subsequent decision not to use the patented technology. There is no 

provision for buyer’s remorse. 

The lump-sum structure also creates risks for both parties. The licensed 

technology may be wildly successful, and the licensee may have acquired the 

technology for far less than what later proved to be its economic value. The alternative 

risk, of course, is the licensee may have paid a lump-sum far in excess of what the 

patented invention is later shown to be worth in the marketplace. 

As noted, Lucent’s licensing expert, Roger Smith, argued for damages based 

solely on a running royalty rate. Smith emphasized his choice of a running royalty over 

a lump-sum payment. 

Q: Now, in each case, in the [other patents in suit] and then finally the Day 

356 form entry patent, in each case you’ve selected a running royalty 

structure for your reasonable royalty; is that right? 

A: I certainly did, yes. 

J.A. 07805. He also explained that “the running royalty in a hypothetical negotiation 

such as the one we’re considering here would be appropriate, even though lump-sum 

does have the advantage that brings the money up front or at least some of it.” Id. 

On appeal, however, Lucent defends the damages award, contending that 

substantial evidence supports the lump-sum award of about $358 million. This is 

problematic for several reasons. First, no evidence of record establishes the parties’ 

2008-1485, -1487, -1495 37

expectations about how often the patented method would be used by consumers. 

Second, the jury heard little factual testimony explaining how a license agreement 

structured as a running royalty agreement is probative of a lump-sum payment to which 

the parties would have agreed. Third, the license agreements for other groups of 

patents, invoked by Lucent, were created from events far different from a license 

negotiation to avoid infringement of the one patent here, the Day patent. 

Parties agreeing to a lump-sum royalty agreement may, during the license 

negotiation, consider the expected or estimated usage (or, for devices, production) of a 

given invention, assuming proof is presented to support the expectation, because the 

more frequently most inventions are used, the more valuable they generally are and 

therefore the larger the lump-sum payment. Conversely, a minimally used feature, with 

all else being equal, will usually command a lower lump-sum payment. In this case, 

Lucent identifies no documentary evidence or testimony showing the parties’ 

expectations as to usage of the claimed method. Lucent submitted no evidence upon 

which a jury could reasonably conclude that Microsoft and Lucent would have 

estimated, at the time of the negotiation, that the patented date-picker feature would 

have been so frequently used or valued as to command a lump-sum payment that 

amounts to approximately 8% of the sale price of Outlook. Cf. Interactive Pictures Corp. 

v. Infinite Pictures, Inc., 274 F.3d 1371, 1384-85 (Fed. Cir. 2001) (accepting as suitable 

factual evidence the patentee’s “business plan and its projections for future sales” 

prepared “two months before infringement began”). 

2008-1485, -1487, -1495 38

Lucent’s expert Mr. Smith did try to explain how one would calculate what an 

acceptable lump-sum would be. 

Q: Well, when one is considering what the magnitude of a lump-sum 

payment might be, does one ever look at what the expected royalty – total 

royalty would be produced by a running royalty based on the available 

information at that time? 

A: That generally is the way a lump sum would be determined, by looking 

at what the running royalty – what the value of each use of the patent 

might be and then speculating as to the extent of the future use. 

J.A. 07805 (emphasis added). But an explanation urging jurors to rely on speculation, 

without more, is often insufficient. See Novosteel SA v. United States, 284 F.3d 1261, 

1276 (Fed. Cir. 2002) (Dyk, J., dissenting) (“It is well established that speculation does 

not constitute ‘substantial evidence.’”). Smith repeated his “lump-sum speculation 

theory” when he told the jury that parties “speculate” as to what they expect the future to 

be like when negotiating a lump-sum payment for a patent license. In short, Smith’s 

testimony could be interpreted as suggesting to the jury that it was proper to “speculate” 

as to the proper lump-sum damages amount even though he may have intended the 

word “speculate” to mean “estimate.” 

Despite this shortcoming in its evidence, Lucent relies on eight varied license 

agreements which purportedly support the jury’s lump-sum damages award. When we 

examine these license agreements, along with the relevant testimony, we are left with 

two strong conclusions. First, some of the license agreements are radically different 

from the hypothetical agreement under consideration for the Day patent. Second, with 

the other agreements, we are simply unable to ascertain from the evidence presented 

the subject matter of the agreements, and we therefore cannot understand how the jury 

could have adequately evaluated the probative value of those agreements. 

2008-1485, -1487, -1495 39

Only four of the eight agreements purport to be lump-sum agreements: 

(1) a 1993 agreement between Dell and IBM for $290 million; (2) a 1996 agreement 

between Microsoft and Hewlett-Packard for $80 million; (3) a 1997 agreement between 

Microsoft and Apple Computer for $93 million; and (4) a 1999 agreement between 

Microsoft and Inprise for $100 million. Lucent’s brief characterizes the four agreements 

as covering “PC-related patents,” as if personal computer kinship imparts enough 

comparability to support the damages award. For the latter three, it is impossible for us, 

based on the record, to determine whether the agreements are at all comparable to the 

hypothetical agreement of the present suit. For the first agreement, what little 

explanation there is only underscores the differences between it and any hypothetical 

agreement for the Day patent. 

The 1993 agreement between IBM and Dell appears to be a modification of their 

1988 agreement. These two IBM-Dell agreements are vastly different from any 

agreement Microsoft and Lucent would have struck for the Day patent at the time of 

infringement. As best as we can discern, the 1988 agreement appears to govern IBM’s 

licensing of its entire patent portfolio protecting its one-time dominance in the personal 

computer market. See J.A. 08193 (witness testimony explaining in cursory fashion the 

Dell-IBM agreement); see also Dell Computer Co.: Clones of IBM’s PS/2 Line of 

Computers Announced, The Wall Street Journal, Apr. 19, 1988, at 13 (reporting that 

Dell “became the first company to announce copies of International Business Machines 

Corp.’s year-old Personal System/2 computer line”); Two Companies in Texas Race to 

Clone PS/2, The Wall Street Journal, Apr. 8, 1988, at 20 (reporting that IBM was 

“considering raising the royalty it charges, and plans to be more aggressive in making 

2008-1485, -1487, -1495 40

sure competitors take out licenses” for personal computers). At the time, conventional 

wisdom instructed that selling IBM clones required a license to IBM’s patent portfolio. 

Dell’s business was built around selling IBM clones. From this information, a 

reasonable juror could only conclude that the IBM-Dell license agreement for multiple 

patents to broad, PC-related technologies is directed to a vastly different situation than 

the hypothetical licensing scenario of the present case involving only one patent, the 

Day patent, directed to a narrower method of using a graphical user interface tool 

known as the date-picker. Of course, without more information about the IBM-Dell 

agreement, one can only speculate about how the Dell-IBM agreement could be 

compared to any licensing agreement involving the Day patent. 

For the other three lump-sum agreements, Lucent’s expert supplied no 

explanation to the jury about the subject matter or patents covered by those 

agreements. For example, the entire substance of Lucent’s expert’s testimony about 

the Microsoft-Apple agreement amounted to the following colloquy: 

Q: What did you ascertain or what is Plaintiff’s Exhibit 5150? 

A: Plaintiff’s Exhibit 5150 is a patent cross-license agreement between 

Microsoft and Apple. 

Q: And what did you find significant about this cross-license agreement 

between Microsoft and Apple? 

A: The slide that’s on the screen shows that this is a cross-license in 

which Hewlett – in which Microsoft gave to Apple in addition to a license 

under its patents a royalty payment or a balancing payment of some 

$93,000,000. 

J.A. 07746. 7 Counsel for Lucent immediately followed this exchange with an equally 

scant inquiry into the Microsoft-Inprise agreement. 

7 The Microsoft-Apple agreement also appears directed to a large 

collaboration far more complicated than the patent covering the infringing date-picker 

2008-1485, -1487, -1495 41

Q: And could you turn in your evidence binder to Plaintiff’s Exhibit 5151 

and tell us what that is? 

A: 5151 is a patent cross-license agreement between Microsoft and a 

company known as Inprise. 

Q: And if you could turn to slide 41, would that assist the presentation of 

your testimony in connection with that agreement? 

A: It would. 

* * * 

THE WITNESS: This call out shows the essential features of the Inprise 

Microsoft license agreement which [is] the same general idea as those 

which we’ve just been looking at. Microsoft pays Inprise a sum of money, 

in this case $100,000,000, in addition to granting a license under its 

patents, and Inprise gets a royalty-free license under Microsoft’s patents. 

J.A. 07746. The jury heard similarly superficial testimony about the license agreement 

between Microsoft and Hewlett-Packard. Lucent’s expert merely observed that, under 

the cross-license, Hewlett-Packard received “a royalty-free worldwide fully paid up 

license under the Microsoft patents” and Microsoft “agreed in return for a license under 

Helwett Packard’s patents to pay Hewlett Packard the sum of . . . $80,000,000.” 

J.A. 07745. 

Lucent candidly admits in its brief that “none of the real world licenses introduced 

at trial arose from circumstances identical to those presumed to prevail in the 

hypothetical royalty negotiation.” Appellee’s Br. 50. Moreover, the testimony excerpted 

above belies Lucent’s claim of “present[ing] particularized expert testimony explaining 

how various differences between the real and hypothetical license 

tool at issue in the present appeal. See Press Release, Microsoft Corp., Microsoft and 

Apple Affirm Commitment to Build Next Generation Software for Macintosh (Aug. 6, 

1997), http://www.microsoft.com/presspass/press/1997/aug97/msmacpr.mspx (noting 

that “[t]he companies agreed to a broad patent cross-licensing agreement” that “paves 

the way for the two companies to work more closely on leading-edge technologies for 

the Mac platform”). But, in view of the sparse record, any supposition about the 

agreement would again be little more than speculation. 

2008-1485, -1487, -1495 42

negotiations . . . would factor into the appropriate royalty for Microsoft’s infringement.” 

Id. The testimony provides no analysis of those license agreements, other than, for 

example, noting the agreement was a cross-license of a large patent portfolio and the 

amount paid. Lucent had the burden to prove that the licenses were sufficiently 

comparable to support the lump-sum damages award. The law does not require an 

expert to convey all his knowledge to the jury about each license agreement in 

evidence, but a lump-sum damages award cannot stand solely on evidence which 

amounts to little more than a recitation of royalty numbers, one of which is arguably in 

the ballpark of the jury’s award, particularly when it is doubtful that the technology of 

those license agreements is in any way similar to the technology being litigated here. 

Lucent also cites four running-royalty license agreements which purportedly 

provide substantial evidence supporting a lump-sum damages award of approximately 

$358 million. A significant shortcoming of these agreements is their “running-royalty” 

nature, however. As we noted above, certain fundamental differences exist between 

lump-sum agreements and running-royalty agreements. This is not to say that a 

running-royalty license agreement cannot be relevant to a lump-sum damages award, 

and vice versa. For a jury to use a running-royalty agreement as a basis to award 

lump-sum damages, however, some basis for comparison must exist in the evidence 

presented to the jury. In the present case, the jury had almost no testimony with which 

to recalculate in a meaningful way the value of any of the running royalty agreements to 

arrive at the lump-sum damages award. 

Additionally, in its brief before us, Lucent appears to misunderstand the nature of 

a per-unit royalty. Lucent appears to consider a per-unit royalty as being equivalent to a 

2008-1485, -1487, -1495 43

lump-sum royalty. See Appellee’s Br. 49-50 (“[T]he aforementioned licenses—calling 

for a lump-sum or commuted per-unit royalty not calculated as a function of product 

revenue—support the damages award entirely independent from Microsoft’s product 

revenues.”). What that statement ignores is the relationship between product revenues 

and per-unit running royalties. A per-unit running royalty is paid based on the number of 

units ultimately sold (or made, etc.), which is of course directly related to product 

revenues. As more units are sold, more revenue is earned and more royalties are paid. 

If the licensee chooses to omit the patented feature from its commercial product, the 

licensee will generally owe no per-unit royalty. Thus, a per-unit running royalty 

agreement differs from a lump-sum agreement in the same general ways a percentage- 

of-price running royalty agreement differs from a lump-sum agreement. See Raymond 

T. Nimmer & Jeff Dodd, Modern Licensing Law § 7:4 (2008) (“Most running royalties fall 

into one of two categories: fixed price per unit and percentage of 

revenue/sales/income.”). 

Furthermore, the running royalty agreements put into evidence, as with the lump- 

sum agreements, differ substantially from the hypothetical negotiation scenario involving 

the Day patent. The four running royalty agreements upon which Lucent relies are 

agreements between itself and Vox Communications (“Vox agreement”); between itself 

and Kenwood (“Kenwood agreement”); between itself and Acer (“Acer agreement”); and 

between Microsoft and MPEG-LA (“MPEG agreement”). 

The Vox agreement covered five Lucent patents, which, as explained by Lucent’s 

expert, are directed to PC graphics boards manufactured by Vox. In addition to a lump- 

sum payment of $50,000, Vox agreed to pay a per-unit rate of $2.00 for each licensed 

2008-1485, -1487, -1495 44

product. But no testimony described how the patented technology of the Vox 

agreement relates to the licensed graphics boards. Lucent’s expert never explained to 

the jury whether the patented technology is essential to the licensed product being sold, 

or whether the patented invention is only a small component or feature of the licensed 

product (as is the case here). The jury also had no information about the price of Vox’s 

PC graphics boards and thus was unable to assess the magnitude of the $2.00 rate, 

which seems particularly relevant given Lucent’s defense of an award amounting to 

about 8% of the market value of Outlook. In the absence of the price of graphics 

boards, the $2.00 value is difficult, if not impossible, to evaluate. The testimony of 

Lucent’s expert relating to the Vox agreement was confined essentially to the fact that 

the agreement is a cross-licensing agreement in which the rights granted to Lucent 

were royalty-free and that the royalty rate is structured as a commuted rate. 

The Kenwood agreement, covering two Lucent patents directed to DVD player 

products, is a hybrid lump-sum/running royalty cross-license agreement. Kenwood 

agreed to pay Lucent an up-front payment of $3 million along with a per-unit royalty of 

$1.50 for each product in excess of 300,000 units. Lucent’s expert told the jury that the 

Kenwood agreement was a cross-license, conveying rights to Lucent to practice 

Kenwood’s patents, but the jury never learned anything about those patent rights and 

how valuable or essential those rights were. Even if we were to apply the $1.50 per unit 

rate of the Kenwood agreement to the number of infringing units that could be used to 

infringe in the present case, this would yield only about $165 million, substantially less 

than the $358 million awarded by the jury. 

2008-1485, -1487, -1495 45

The Acer agreement, executed in 1998, involved eight patents and various 

commercial products. Lucent refers to the Acer agreement as one involving PC-related 

patents. During his testimony, Lucent’s expert focused almost exclusively on the 

per-unit royalty rate of $2.50 and the lump-sum payment of $14.5 million. But the jury 

again did not hear any explanation of the types of products covered by the agreement 

or the various royalty rates set forth in the agreement. Specifically, the agreement calls 

for different royalties for different products. For so-called “reportable products,” the rate 

is not a fixed dollar amount but set at 2%, while the royalty rates for “semiconductive 

devices” is in the range of 1%. Furthermore, Lucent did not explain how the fact that 

the Acer agreement involved eight patents affects how probative it is of the Microsoft- 

Lucent hypothetical negotiation over one patent. Nor is there any document or 

testimony upon which a jury could have considered how similar or dissimilar the 

patented technology of the Acer agreement is to the invention of using the date-picker. 

Nor is there any evidence or testimony about how the $2.50 per unit rate corresponds to 

a percentage of the cost of the “personal computers” sold under the license agreement. 

It is not implausible that the average price of the computers subject to the Acer 

agreement was close to $1000. See Larry Armstrong, How Did Santa Carry All Those 

Computers, Business Week, Jan. 11, 1999, at 46, 46 (noting that, in November 1999, 

“the average selling price of a PC without monitor dropped below $1,000 for the first 

time”); Roger O. Crockett & Peter Burrows, PC Makers Race to the Bottom, Business 

Week, Oct. 12, 1998, at 48, 48 (noting an average PC price of about $1,200); Nick 

Turner, PC World Comes to Grips With Less-Is-More Mentality, Investor’s Business 

Daily, Dec. 30, 1998, at A8 (citing an average PC cost of $1,026). Such an average 

2008-1485, -1487, -1495 46

price would mean the $2.50 per-unit rate of the Acer agreement equates to 

approximately one-quarter of one percent of the value of the computer, which is about 

one-thirtieth the constructive rate awarded to Lucent. 

Finally, the MPEG agreement on its face supports a higher royalty rate of $4 per 

unit. But, as with the other running royalty agreements, the structure of the MPEG 

agreement is more complicated, and the jury had little to no testimony explaining how 

such complexity would have affected the hypothetical negotiation analysis. Specifically, 

the 31-page agreement contains numerous provisions covering various MPEG-related 

products (e.g., decoding products, distribution encoding products, program stream 

products, etc.). Moreover, the various products appear to have different royalty rates, 

some as low as a penny per unit. 

We now consider what Microsoft advocated, namely that the hypothetical 

negotiation would have yielded a lump-sum licensing agreement for $6.5 million. For 

whatever reason, Microsoft urged the jury to accept its theory based on a proffer of a 

single license Microsoft had executed for a graphical user interface technology. Thus, 

at a minimum, a reasonable jury could have awarded $6.5 million, or some larger 

amount as permitted by the evidence. See Rite-Hite, 56 F.3d at 1555 (“[W]hat an 

infringer would prefer to pay is not the test for damages.”). 

But we see little evidentiary basis under Georgia-Pacific Factor 2 for awarding 

roughly three to four times the average amount in the lump-sum agreements in 

evidence. Here the award was $358 million; there, the amounts were $80, 93, 100, and 

290 million. That some licenses were cross-licenses or commuted-rate licenses—which 

may warrant a higher damages award—does not fill the evidentiary lacunae. Again, it 

2008-1485, -1487, -1495 47

was Lucent’s burden to prove that the licenses relied on were sufficiently comparable to 

sustain a lump-sum damages award of $358 million. This is not an instance in which 

the jury chose a damages award somewhere between maximum and minimum lump- 

sum amounts advocated by the opposing parties. Cf. Fuji Photo, 394 F.3d at 1378 

(“[T]he jury is not bound to accept a rate proffered by one party’s expert but rather may 

choose an intermediate royalty rate.”). For the reasons stated, Factor 2 weighs strongly 

against the jury’s award. 

2. Factors 10 and 13 

Factor 10 is “[t]he nature of the patented invention; the character of the 

commercial embodiment of it as owned and produced by the licensor; and the benefits 

to those who have used the invention.” Georgia-Pacific, 318 F. Supp. at 1120. Factor 

13 is “[t]he portion of the realizable profit that should be credited to the invention as 

distinguished from non-patented elements, the manufacturing process, business risks, 

or significant features or improvements added by the infringer.” Id. These two factors, 

at least as applied to the facts of this case, both aim to elucidate how the parties would 

have valued the patented feature during the hypothetical negotiation. 

The evidence can support only a finding that the infringing feature contained in 

Microsoft Outlook is but a tiny feature of one part of a much larger software program. 

Microsoft’s expert explained that Outlook’s e-mail component is “the part of Outlook 

that’s most commonly used by our customers.” Microsoft’s witness also explained that, 

in addition to sending and receiving e-mails, a user can create electronic tasks and 

notes. Additionally, Outlook can be used as an electronic Rolodex, storing contact 

information, such as phone numbers, addresses, and the like. It also has a fully 

2008-1485, -1487, -1495 48

functional calendar system, in which a user can record appointments, meetings, and 

other items on one’s schedule. As Lucent’s own expert testified, Outlook is a “personal 

organizer” that is “an integrated suite of abilities to do e-mail, to set up contacts, to 

arrange meetings, to maintain your personal calendar, et cetera.” In short, Outlook is 

an enormously complex software program comprising hundreds, if not thousands or 

even more, features. We find it inconceivable to conclude, based on the present record, 

that the use of one small feature, the date-picker, constitutes a substantial portion of the 

value of Outlook. 

The parties presented little evidence relating to Factor 13. Nonetheless, the only 

reasonable conclusion is that most of the realizable profit must be credited to 

non-patented elements, such as “the manufacturing process, business risks, or 

significant features or improvements added by [Microsoft].” As explained by Microsoft’s 

expert Mr. Kennedy, Outlook consists of millions of lines of code, only a tiny fraction of 

which encodes the date-picker feature. Although the weighing of Factor 13 cannot be 

reduced to a mere counting of lines of code, the glaring imbalance between infringing 

and non-infringing features must impact the analysis of how much profit can properly be 

attributed to the use of the date-picker compared to non-patented elements and other 

features of Outlook. Here, numerous features other than the date-picker appear to 

account for the overwhelming majority of the consumer demand and therefore 

significant profit. 

The only reasonable conclusion that can be drawn from this evidence is that the 

infringing use of Outlook’s date-picker feature is a minor aspect of a much larger 

software program and that the portion of the profit that can be credited to the infringing 

2008-1485, -1487, -1495 49

use of the date-picker tool is exceedingly small. For these reasons, Factors 10 and 13 

of Georgia-Pacific provide little support for the jury’s lump-sum damages award of 

$357,693,056.18. 

3. Factor 11 

Factor 11 is “[t]he extent to which the infringer has made use of the invention; 

and any evidence probative of the value of that use.” Georgia-Pacific, 318 F. Supp. 

at 1120. As with Factors 10 and 13, the eleventh factor informs the court and jury about 

how the parties would have valued the patented feature during the hypothetical 

negotiation. In doing so, Factor 11 relies on evidence about how much the patented 

invention has been used. Implicit in this factor is the premise that an invention used 

frequently is generally more valuable than a comparable invention used infrequently. 

During oral argument, Microsoft characterized as irrelevant information about 

how often the date-picker tool has in fact been used by consumers of Microsoft 

products. That is so, according to Microsoft, because such facts postdate the time of 

the hypothetical negotiation. See Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 

1075, 1081 (Fed. Cir. 1983) (“The issue of the infringer’s profit is to be determined not 

on the basis of a hindsight evaluation of what actually happened, but on the basis of 

what the parties to the hypothetical license negotiations would have considered at the 

time of the negotiations.”). But neither precedent nor economic logic requires us to 

ignore information about how often a patented invention has been used by infringers. 

Nor could they since frequency of expected use and predicted value are related. 

2008-1485, -1487, -1495 50

In Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 698 

(1933), the Supreme Court recognized that factual developments occurring after the 

date of the hypothetical negotiation can inform the damages calculation: 

[A] different situation is presented if years have gone by before the 

evidence is offered. Experience is then available to correct uncertain 

prophecy. Here is a book of wisdom that courts may not neglect. We find 

no rule of law that sets a clasp upon its pages, and forbids us to look 

within. 

Similarly, our case law affirms the availability of post-infringement evidence as probative 

in certain circumstances. In Fromson v. Western Litho Plate & Supply Co., 853 F.2d 

1568, 1575 (Fed. Cir. 1988), overruled on other grounds by Knorr-Bremse Systeme 

Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc), 

we observed that the hypothetical negotiation analysis “permits and often requires a 

court to look to events and facts that occurred thereafter and that could not have been 

known to or predicted by the hypothesized negotiators.” 

Consideration of evidence of usage after infringement started can, under 

appropriate circumstances, be helpful to the jury and the court in assessing whether a 

royalty is reasonable. Usage (or similar) data may provide information that the parties 

would frequently have estimated during the negotiation. See Sinclair Ref., 289 U.S. at 

697 (“The use that has been made of the patented device is a legitimate aid to the 

appraisal of the value of the patent at the time of the breach.”). Such data might, 

depending on the case, come from sales projections based on past sales, consumer 

surveys, focus group testing, and other sources. Even though parties to a license 

negotiation will usually not have precise data about future usage, they often have rough 

estimates as to the expected frequency of use. This quantitative information, assuming 

2008-1485, -1487, -1495 51

it meets admissibility requirements, ought to be given its proper weight, as determined 

by the circumstances of each case. 

On the other hand, we have never laid down any rigid requirement that damages 

in all circumstances be limited to specific instances of infringement proven with direct 

evidence. Such a strict requirement could create a hypothetical negotiation far-removed 

from what parties regularly do during real-world licensing negotiations. As shown by the 

evidence in this case, companies in the high-tech computer industry often strike 

licensing deals in which the amount paid for a particular technology is not necessarily 

limited to the number of times a patented feature is used by a consumer. A company 

licensing a patented method often has strong reasons not to tie the royalty amount 

strictly to usage. The administrative cost of monitoring usage can be prohibitively 

expensive. Furthermore, with some inventions, say for example a method of detecting 

fires, value is added simply by having the patented invention available for use. Cf. 

Hanson, 718 F.2d at 1080-81 (approving a reasonable royalty not based on “actual use 

of the snowmaking machinery” but on what a party would have paid to have the 

machine available to use). Thus, potential licensors and licensees routinely agree to 

royalty payments regardless of whether the invention is used frequently or infrequently 

by the consumer. 

With the foregoing in mind, we observe that the evidence of record is 

conspicuously devoid of any data about how often consumers use the patented date- 

picker invention. In one respect, Lucent believes the damages award is supported by 

the pervasive use of forms throughout the three software programs. What this position 

lacks is the requisite focus on the infringed claim. The damages award can’t be 

2008-1485, -1487, -1495 52

supported by evidence that the infringers also used additional, non-infringing features. 

Only when the date-picker is used to fill out a form does infringement occur. All other 

means of filling out a form, such as typing in the entire date, do not infringe. The 

damages award ought to be correlated, in some respect, to the extent the infringing 

method is used by consumers. This is so because this is what the parties to the 

hypothetical negotiation would have considered. Lucent tries to stretch the claim scope 

so that claim 19 covers all pop-up tools. If this were the proper claim construction, we 

might have to reverse the validity ruling. But the claim construction—which neither 

party has appealed—is not so broad. 

Furthermore, Lucent’s reliance on Dynacore is unavailing. As we noted above, 

substantial evidence supports the jury’s verdict of indirect infringement by Microsoft. 

But all the circumstantial evidence supports is the jury’s implicit finding that at least one 

person performed the patented method one time in the United States sometime during 

the relevant period. Beyond that finding, all the jury had was speculation. No evidence 

describes how many Microsoft Outlook users had ever performed the patented method 

or how many times. Lucent had the burden to prove that the extent to which the 

infringing method has been used supports the lump-sum damages award. 

4. Other Factors 

Other Georgia-Pacific factors applicable here include “[t]he nature and scope of 

the license, as exclusive or nonexclusive” (Factor 3); “[t]he licensor’s established policy 

and marketing program to maintain his patent monopoly” (Factor 4); “[t]he commercial 

relationship between the licensor and the licensee” (Factor 5); “[t]he established 

profitability of the product made under the patent” (Factor 8); “[t]he utility and 

2008-1485, -1487, -1495 53

advantages of the patent property over the old modes or devices” (Factor 9); and “[t]he 

portion of the profit or of the selling price that may be customary . . . to allow for the use 

of the invention” (Factor 12). 318 F. Supp. at 1120. To the extent these factors are 

relevant, they appear somewhat to offset one another. 

For instance, Factor 8, the profitability of the product made, supports a higher 

versus a lower reasonable royalty, given the unrebutted evidence that the products at 

issue are sold with an approximately 70-80% profit margin. Contrasting this evidence 

are Factors 3 and 9. Non-exclusive licenses generally command lower royalties. 

See Parr, supra, at 64 (“Typically, higher royalty rates are associated with license 

agreements that provide the licensee with exclusive rights to use the IP.”). And, from 

the evidence presented, the infringing use of the date-picker seems to have, at best, 

only a slight advantage over what is arguably the closest prior art. We are mindful, 

however, that a jury could have reasonably concluded otherwise with several of the 

factors mentioned here. Even so, such reasonable conclusions, in this case, cannot 

overcome the substantial infirmities in the evidence for the other factors detailed above. 

5. Conclusion on Lump-Sum Reasonable Royalty 

Having examined the relevant Georgia-Pacific factors, we are left with the 

unmistakable conclusion that the jury’s damages award is not supported by substantial 

evidence, but is based mainly on speculation or guesswork. When the evidence is 

viewed in toto, the jury’s award of a lump-sum payment of about $358 million does not 

rest on substantial evidence and is likewise against the clear weight of the evidence. 

The evidence does not sustain a finding that, at the time of infringement, Microsoft and 

Lucent would have agreed to a lump-sum royalty payment subsequently amounting to 

2008-1485, -1487, -1495 54

approximately 8% of Microsoft’s revenues for the sale of Outlook (and necessarily a 

larger percentage of Outlook’s profits). We need not identify any particular Georgia- 

Pacific factor as being dispositive. Rather, the flexible analysis of all applicable 

Georgia-Pacific factors provides a useful and legally-required framework for assessing 

the damages award in this case. Furthermore, we do not conclude that the 

aforementioned license agreements (or other evidence) cannot, as a matter of law, 

support the damages award in this case. Instead, the evidence as presented did not 

reach the “substantial evidence” threshold and therefore no reasonable jury could have 

found that Lucent carried its burden of proving that the evidence, under the relevant 

Georgia-Pacific factors, supported a lump-sum damages award of $357,693,056.18. 

We admit that the above analysis focuses on Microsoft Outlook, not the other two 

software programs. Because the damages award with respect to infringement by 

Outlook is not supported by the evidence but is against the clear weight of the evidence, 

a new trial on damages is necessary. We therefore need not specifically address the 

evidence as it relates to Microsoft Money and Windows Mobile. We leave that to the 

jury or court to assess on remand. We acknowledge that the factual findings based on 

the pertinent Georgia-Pacific factors may not be identical for all three products. For 

example, the tools that practice the infringing method may be incorporated more (or 

less) extensively throughout Windows Mobile and Microsoft Money than in Outlook. 

Creating a licensing agreement for patented technology is, at best, an inexact 

science. In actual licensing negotiations, willing parties negotiating at arms-length do 

not necessarily generate and analyze precise economic data concerning the perceived 

value of a patented invention. A complicated case this was, and the damages evidence 

2008-1485, -1487, -1495 55

of record was neither very powerful, nor presented very well by either party. Most jury 

damages awards reviewed on appeal have been held to be supported by substantial 

evidence. See Skenyon et al., supra, at § 3:20 (summarizing sixty-two damages 

cases). Nonetheless, on post-trial JMOL motions, district court judges must scrutinize 

the evidence carefully to ensure that the “substantial evidence” standard is satisfied, 

while keeping in mind that a reasonable royalty analysis “necessarily involves an 

element of approximation and uncertainty.” Unisplay, 69 F.3d at 517. 

B. Entire Market Value Analysis 

Microsoft argues that the damages award must be reversed because the jury 

erroneously applied the entire market value rule. Despite the jury’s indication on the 

verdict form that it was awarding a lump-sum reasonable royalty, Microsoft believes that 

the only way the jury could have calculated a figure of $357,693,056.18 was by applying 

a royalty percentage to a total sales figure of the infringing software products. Indeed, it 

is difficult to understand how the jury could have chosen its lump-sum figure down to the 

penny unless it used a running royalty calculation. Furthermore, as Microsoft explains 

in its brief, working the math backwards strongly suggests that the jury must have used 

some calculation of a rate applied to the entire market value of the software. See 

Microsoft Response and Reply Br. 47 (“Applying Lucent’s 8% rate to all of Microsoft’s 

sales and half of Dell’s, using a weighted average of 85% OEM prices and 15% retail 

prices, yields damages of $358,835,648—extremely close to the jury’s award.” (footnote 

omitted)). Alternatively, the jury could have simply used a somewhat lower rate, such 

as about 5.5%, applied to the total sales figure. Assuming that the jury did apply the 

entire market value rule, such application would amount to legal error for two reasons. 

2008-1485, -1487, -1495 56

In one sense, our law on the entire market value rule is quite clear. For the entire 

market value rule to apply, the patentee must prove that “the patent-related feature is 

the ‘basis for customer demand.’” Rite-Hite, 56 F.3d at 1549 (quoting State Indus., 

883 F.2d at 1580); see also Bose Corp v. JBL, Inc., 274 F.3d 1354, 1361 (Fed. Cir. 

2001); TWM Mfg., 789 F.2d at 901 (“The entire market value rule allows for the recovery 

of damages based on the value of an entire apparatus containing several features, 

when the feature patented constitutes the basis for customer demand.”). 

In the distant past, before a contemporary appreciation of the economics of 

infringement damages, the Supreme Court seemingly set forth rigid rules concerning 

the entire market value rule. Shortly before the Civil War, in Seymour v. McCormick, 

57 U.S. (16 How.) 480, 491 (1853), a case involving one of Cyrus McCormick’s famous 

reaping machine inventions, the Court warned that it would be “a very grave error to 

instruct a jury ‘that as to the measure of damages the same rule is to govern, whether 

the patent covers an entire machine or an improvement on a machine.’” About a 

century and a quarter ago, in Garretson v. Clark, the Court expressed further concern 

about basing damages on the value of the entire product: 

When a patent is for an improvement, and not for an entirely new machine 

or contrivance, the patentee must show in what particulars his 

improvement has added to the usefulness of the machine or contrivance. 

He must separate its results distinctly from those of the other parts, so that 

the benefits derived from it may be distinctly seen and appreciated. . . . 

The patentee . . . must in every case give evidence tending to separate or 

apportion the defendant’s profits and the patentee’s damages between the 

patented feature and the unpatented features, and such evidence must be 

reliable and tangible, and not conjectural or speculative; or he must show, 

by equally reliable and satisfactory evidence, that the profits and damages 

are to be calculated on the whole machine, for the reason that the entire 

value of the whole machine, as a marketable article, is properly and legally 

attributable to the patented feature. 

2008-1485, -1487, -1495 57

111 U.S. 120, 121 (1884) (quotation marks omitted). And early last century, the Court 

elaborated on this theme: 

[An] invention may have been used in combination with valuable 

improvements made, or other patents appropriated by the infringer, and 

each may have jointly, but unequally, contributed to the profits. In such 

case, if plaintiff’s patent only created a part of the profits, he is only 

entitled to recover that part of the net gains. 

Westinghouse Elec. & Mfg. Co. v. Wagner Elec. & Mfg. Co., 225 U.S. 604, 614-15 

(1912). 

Translating the Court’s early stylistic description into a precise, contemporary, 

economic paradigm presents a challenge. Notwithstanding this obstacle, the objective 

of the Court’s concern has been two-fold: determining the correct (or at least 

approximately correct) value of the patented invention, when it is but one part or feature 

among many, and ascertaining what the parties would have agreed to in the context of 

a patent license negotiation. Litigants must realize that the two objectives do not always 

meet at the same precise number. Furthermore, licensors of patented technology often 

license an invention for more or less than its true “economic value.” Such is the 

inherent risk in licensing intangible assets that may have no established market value. 

The first flaw with any application of the entire market value rule in the present 

case is the lack of evidence demonstrating the patented method of the Day patent as 

the basis—or even a substantial basis—of the consumer demand for Outlook. As 

explained above, the only reasonable conclusion supported by the evidence is that the 

infringing use of the date-picker tool in Outlook is but a very small component of a much 

larger software program. The vast majority of the features, when used, do not infringe. 

The date-picker tool’s minor role in the overall program is further confirmed when one 

considers the relative importance of certain other features, e.g., e-mail. Consistent with 

2008-1485, -1487, -1495 58

this description of Outlook, Lucent did not carry its evidentiary burden of proving that 

anyone purchased Outlook because of the patented method. Indeed, Lucent’s 

damages expert conceded that there was no “evidence that anybody anywhere at any 

time ever bought Outlook, be it an equipment manufacturer or an individual 

consumer, . . . because it had a date picker.” J.A 07821-22. And when we consider the 

importance of the many features not covered by the Day patent compared to the one 

infringing feature in Outlook, we can only arrive at the unmistakable conclusion that the 

invention described in claim 19 of the Day patent is not the reason consumers purchase 

Outlook. Thus, Lucent did not satisfy its burden of proving the applicability of the entire 

market value rule. 

As for Windows Mobile and Microsoft Money, a jury’s conclusion might possibly 

be different. At this point in the litigation, we again need not decide these issues. 

Because the damages award based on the infringing date-picker feature of Outlook is 

not supported by substantial evidence and is contrary to the clear weight of the 

evidence, the damages award must be vacated. When the case is remanded to the trial 

court for further proceedings consistent with this opinion, it may be helpful to analyze 

the three infringing software products independently. 

The second flaw with any application of the entire market value rule in this case 

lies in the approach adopted by Lucent’s licensing expert. He had first tried to apply the 

entire market value rule to the sale of the “infringing” computers loaded with the 

software, opining that Microsoft and Lucent would have agreed to a 1% royalty based 

on the entire price of the computer containing Outlook. In response, Microsoft filed a 

motion in limine to exclude such testimony, which the district court granted. At trial, 

2008-1485, -1487, -1495 59

Lucent’s expert changed his opinion, contending that the royalty base should be the 

price of the software (and not the entire computer) but also that the royalty rate should 

be increased to 8% (from 1%). This opinion contrasted starkly to the rates he proposed 

for the other patents in suit, which were in the 1% range. In choosing 8%, he reasoned 

that, “in a typical situation, if one applied a royalty to a smaller patented portion in a 

computer as opposed to the entire computer using typically infringed patents, 

8-percent . . . of the fair market value of the patented portion would equate to 1-percent 

of the fair market value of the entire computer.” 

What Lucent’s licensing expert proposed here does not comport with the purpose 

of damages law or the entire market value rule. Lucent’s expert tried to reach the 

damages number he would have obtained had he used the price of the entire computer 

as a royalty base. Being precluded from using the computer as the royalty base, he 

used the price of the software, but inflated the royalty rate accordingly. This cannot be 

an acceptable way to conduct an analysis of what the parties would have agreed to in 

the hypothetical licensing context. The approach of Lucent’s expert ignores what the 

district court’s evidentiary ruling tried to accomplish. The district court implicitly 

recognized that any damages computation based on the value of the entire computer 

using common royalty rates (e.g., 1-5%) would be excessive. 

Furthermore, Lucent’s expert admitted that there was no evidence that Microsoft 

had ever agreed to pay an 8% royalty on an analogous patent. See J.A. 07824 (“Q: Did 

you find one license where Microsoft ever agreed to pay an eight percent royalty on 

Outlook for a tiny little feature? A: I didn’t see any Microsoft licenses on Outlook, 

frankly.”). 

2008-1485, -1487, -1495 60

Although our law states certain mandatory conditions for applying the entire 

market value rule, courts must nevertheless be cognizant of a fundamental relationship 

between the entire market value rule and the calculation of a running royalty damages 

award. Simply put, the base used in a running royalty calculation can always be the 

value of the entire commercial embodiment, as long as the magnitude of the rate is 

within an acceptable range (as determined by the evidence). Indeed, “[a]ll running 

royalties have at least two variables: the royalty base and the royalty rate.” Nimmer & 

Dodd, supra, at § 7:5. Microsoft surely would have little reason to complain about the 

supposed application of the entire market value rule had the jury applied a royalty rate 

of 0.1% (instead of 8%) to the market price of the infringing programs. Such a rate 

would have likely yielded a damages award of less than Microsoft’s proposed 

$6.5 million. Thus, even when the patented invention is a small component of a much 

larger commercial product, awarding a reasonable royalty based on either sale price or 

number of units sold can be economically justified. See, e.g., Kearns, 32 F.2d at 1544 

(awarding a reasonable royalty of 90 cents per vehicle that had the infringing 

intermittent windshield wipers, when the average car price was approximately $4000 to 

$6000). 

Some commentators suggest that the entire market value rule should have little 

role in reasonable royalty law. See, e.g., Mark A. Lemley, Distinguishing Lost Profits 

From Reasonable Royalties, 51 Wm. & Mary L. Rev. (forthcoming 2009) (manuscript 

at 2), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1133173 

(suggesting that “courts have distorted the reasonable royalty measure” by “importing 

inapposite concepts like the ‘entire market value rule’ in an effort to compensate patent 

2008-1485, -1487, -1495 61

owners whose real remedy probably should have been in the lost profits category”); 

Amy Landers, Let the Games Begin: Incentives to Innovation in the New Economy of 

Intellectual Property Law, 46 Santa Clara L. Rev. 307, 362 (2006) (“The current 

iterations of the entire market value rule are inconsistent with the Patent Act’s statutory 

language.”). But such general propositions ignore the realities of patent licensing and 

the flexibility needed in transferring intellectual property rights. The evidence of record 

in the present dispute illustrates the importance the entire market value may have in 

reasonable royalty cases. The license agreements admitted into evidence (without 

objection from Microsoft, we note) highlight how sophisticated parties routinely enter 

into license agreements that base the value of the patented inventions as a percentage 

of the commercial products’ sales price. There is nothing inherently wrong with using 

the market value of the entire product, especially when there is no established market 

value for the infringing component or feature, so long as the multiplier accounts for the 

proportion of the base represented by the infringing component or feature. 

We note finally that several amici seemingly challenge the district court’s 

instruction to the jury on the entire market value rule. See Brief for Ten Amici Curiae 

Technology-Based Companies at 11-12 (asserting that “the entire market value rule has 

no place in a reasonable royalty calculation); id. at 15 (“Jurors are charged with the 

entire market value rule but are not given an apportionment charge. No Supreme Court 

authority justifies such a one-sided charge.”); id. at 25 (“The two errors detailed above 

justify a reversal of the damages award in this case and, assuming that the patents are 

valid and infringed . . . , a remand of the case for a new trial on damages. For the 

remand, this Court should provide more specific guidance for reasonable royalty 

2008-1485, -1487, -1495 62

calculations.”). While the amicus brief is informative, we need not address its assertion 

regarding jury instructions given or not given, for the simple reason that neither party at 

trial challenged any damages instruction that was given nor proposed an instruction and 

objected when it was not given. 

V. Lucent’s Cross-Appeal 

Lucent cross-appeals the district court’s summary judgment of non-infringement 

of claims 1, 2, 6, 7, 10-12, 15, and 16 of the Day patent. These claims are apparatus 

claims containing means-plus-function elements not found in claims 19 and 21. As 

Lucent concedes, it did not provide any analysis of the source code of the accused 

programs. Lucent further did not identify the algorithms used in the accused products. 

Lucent’s evidence, as Judge Brewster noted, did “nothing more than demonstrate that 

the accused products reach the same result; the evidence [did] not demonstrate 

circumstantially or otherwise anything about the steps used by the accused products to 

arrive at the result.” Under our precedent, Judge Brewster’s grant of summary 

judgment was not erroneous. See Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech., 

521 F.3d 1328, 1349 (Fed. Cir.), cert. denied, 129 S. Ct. 754 (2008). 

CONCLUSION 

For the foregoing reasons, we affirm the district court’s denial of Microsoft’s 

JMOL motion for non-infringement. We reverse the district court’s denial of Microsoft’s 

JMOL regarding the damages award, vacate the award, and remand for a new trial on 

damages. 

AFFIRMED IN PART, VACATED IN PART, and REMANDED 

2008-1485, -1487, -1495 63

No costs. 

COSTS 

2008-1485, -1487, -1495 64

According to Microsoft, Lucent failed to introduce any evidence that any 

customer actually used the claimed method in any of the Microsoft products. Noting 

that “each accused product has numerous uses that do not involve forms with onscreen 

composition tools” and that “the specific narrow function of the patented method—filling 

in a form—can be performed without using the asserted ‘composition tool’ features,” 

Microsoft urges that “infringement is not inevitable.” The only evidence of direct 

infringement, in Microsoft’s view, is the testimony of Lucent’s expert. 

We agree with Microsoft that there was little, if any, direct evidence of 

infringement. Lucent’s expert testified on cross-examination as follows: 

Q: And you didn’t provide any evidence of anybody, any of Dell’s 

customers, for example, who actually performed all of the steps of the 

claims, right? 

A: Well, I can confess here and now that as a Dell customer, I did perform 

all steps of this claim many, many times. 

Q: When did you do it? 

A: Oh, back in—we’ve had Quicken on our Windows machines since 

around ’98 or ’99. So I’ve used that particular piece of software 

extensively using these tools. 

Q: These gentlemen sitting over here may want to talk to you after you get 

off the stand. 

A: I’m afraid they may. 

Q: But you didn’t produce any evidence to this jury that anybody other 

than Lucent’s trial team and its witnesses who actually performed every 

single step of the claim, is that fair? 

A: Again, my wife performed them all, so— 

J.A. 07517. As is evident, Microsoft correctly points out that Lucent’s direct evidence of 

infringement was limited. 

If that were the only evidence of performing the claimed method, we would likely 

have to reverse. Nevertheless, circumstantial evidence was just adequate to permit a 

jury to find that at least one other person within the United States during the relevant 

2008-1485, -1487, -1495 20

time period, other than the expert, had performed the claimed method. Lucent’s expert 

testified that “[i]t’s hard to imagine that we’re the only two people in the world that ever 

used it.” J.A. 07517. As Lucent notes “Microsoft not only designed the accused 

products to practice the claimed invention, but also instructed its customers to use the 

accused products in an infringing way.” 

An informative case is Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261 

(Fed. Cir. 1986), in which we affirmed a district court’s finding of direct infringement 

based on circumstantial evidence. In Moleculon, the district court held that the patentee 

“had met its burden of showing infringement under section 271(b) with circumstantial 

evidence of extensive puzzle sales, dissemination of an instruction sheet teaching the 

method of restoring the preselected pattern with each puzzle, and the availability of a 

solution booklet on how to solve the puzzle.” Id. at 1272. Similarly, in the present case, 

the jury reviewed evidence relating to the extensive sales of Microsoft products and the 

dissemination of instruction manuals for the Microsoft products. The jury also heard 

corresponding testimony from Lucent’s infringement expert. The circumstantial 

documentary evidence, supplementing the experts’ testimony, was just barely sufficient 

to permit the jury to find direct infringement by a preponderance of the evidence. As in 

Moleculon, the jury in the present case could have reasonably concluded that, 

sometime during the relevant period from 2003 to 2006, more likely than not one person 

somewhere in the United States had performed the claimed method using the Microsoft 

products. See Moleculon, 793 F.2d at 1272 (“It is hornbook law that direct evidence of 

a fact is not necessary. ‘Circumstantial evidence is not only sufficient, but may also be 

more certain, satisfying and persuasive than direct evidence.’” (quoting Michalic v. 

2008-1485, -1487, -1495 21

Microsoft also misreads our holding in Ball Aerosol & Specialty Container, Inc. v. 

Limited Brands, Inc., 555 F.3d 984 (Fed. Cir. 2009). There, we reversed the district 

court’s grant of summary judgment of infringement of a patent claiming a candle tin with 

a removable cover that also acts as a base for the candle holder. The issue in Ball 

Aerosol was one of claim construction rather than whether circumstantial evidence 

proved infringement. The patentee argued that “an apparatus patent claim with 

functional elements is infringed if the accused product is reasonably capable of being 

used without substantial modification in the manner recited in the claim.” Id. at 994. 

The patentee conceded that there was “no proof that the Travel Candle was ever placed 

in the infringing configuration.” Id. at 995. 

Without doubt, Lucent would have been on much firmer ground had it introduced 

some direct evidence of using the claimed method. Nevertheless, Lucent’s 

circumstantial evidence of infringement was “something less than the weight of the 

evidence,” Consolo v. Fed. Maritime Comm’n, 383 U.S. 607, 620 (1966), yet it was just 

“more than a mere scintilla,” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). 

Accordingly and for these reasons, we are not convinced that the district court erred in 

denying Microsoft’s JMOL motion with respect to infringement. For similar reasons, 

substantial evidence supports the jury’s finding as it relates to direct infringement by the 

use of Microsoft Money and Windows Mobile. 

Microsoft also complains that the infringement finding was erroneous because 

Microsoft Outlook does not contain a “composition tool.” 6 This argument likewise fails. 

A Lucent expert, Mr. Bruce Tognazzini, testified that the calendar tool in Outlook works 

6 

Microsoft does not dispute that both Money and Windows Mobile contain 

composition tools. 

2008-1485, -1487, -1495 23

y combining information to compose a complete date. He further explained that a 

composition tool is one that has “the ability to combine” information. A Microsoft expert, 

Mr. Dale Buscaino, appeared to concede this point as well, admitting that “a 

composition tool allows a user to put together parts.” Although most of Microsoft’s 

expert testimony disputed whether Outlook contained a composition tool, that testimony 

was insufficient to require a reasonable jury to find as a factual matter only 

noninfringement. 

B. Contributory Infringement 

Under 35 U.S.C. § 271(c), a party is liable for infringement if he “offers to sell or 

sells within the United States or imports into the United States . . . a material or 

apparatus for use in practicing a patented process, constituting a material part of the 

invention, knowing the same to be especially made or especially adapted for use in an 

infringement of such patent, and not a staple article or commodity of commerce suitable 

for substantial noninfringing use.” “In order to succeed on a claim of contributory 

infringement, in addition to proving an act of direct infringement, plaintiff must show that 

defendant ‘knew that the combination for which its components were especially made 

was both patented and infringing’ and that defendant’s components have ‘no substantial 

non-infringing uses.’” Cross Med. Prods., Inc. v. Medtronic Sofamor Danek, Inc., 

424 F.3d 1293, 1312 (Fed. Cir. 2005) (quoting Golden Blount, Inc. v. Robert H. 

Peterson Co., 365 F.3d 1054, 1061 (Fed. Cir. 2004)). 

According to Microsoft, Lucent did not prove contributory infringement because 

the products have substantial noninfringing uses. Lucent counters that the date-picker 

tool does not have any noninfringing uses. Thus, as framed by the parties, the main 

2008-1485, -1487, -1495 24

issue reduces to whether the “material or apparatus” is the entire software package or 

just the particular tool (e.g., the calendar date-picker) that performs the claimed method. 

If the former, then Microsoft prevails because the entire software package has 

substantial noninfringing uses. If the material or apparatus is the specific date-picker 

tool, then Lucent wins because that tool was “especially made or especially adapted for” 

practicing the claimed method. 

One example illustrates the problem with Microsoft’s approach. Consider a 

software program comprising five—and only five—features. Each of the five features is 

separately and distinctly patented using a method claim. That is, the first feature 

infringes a method claim in a first patent, the second feature infringes a method claim in 

a second patent, and so forth. Assume also that the company selling the software 

doesn’t provide specific instructions on how to use the five features, thus taking 

potential liability outside the realm of § 271(b). In this scenario, under Microsoft’s 

position, the software seller can never be liable for contributory infringement of any one 

of the method patents because the entire software program is capable of substantial 

noninfringing use. This seems both untenable as a practical outcome and inconsistent 

with both the statute and governing precedent. 

Similarly, if, instead of selling Outlook with the date-picker, Microsoft had offered 

the date-picker for sale as a separate download to be used with Outlook, there would be 

little dispute that Microsoft was contributing to infringement of the Day patent. As we 

explained in Ricoh Co. v. Quanta Computer Inc., 550 F.3d 1325, 1337 (Fed. Cir. 2008), 

cert. denied, 129 S. Ct. 2864 (2009), an infringer “should not be permitted to escape 

2008-1485, -1487, -1495 25

expectations about how often the patented method would be used by consumers. 

Second, the jury heard little factual testimony explaining how a license agreement 

structured as a running royalty agreement is probative of a lump-sum payment to which 

the parties would have agreed. Third, the license agreements for other groups of 

patents, invoked by Lucent, were created from events far different from a license 

negotiation to avoid infringement of the one patent here, the Day patent. 

Parties agreeing to a lump-sum royalty agreement may, during the license 

negotiation, consider the expected or estimated usage (or, for devices, production) of a 

given invention, assuming proof is presented to support the expectation, because the 

more frequently most inventions are used, the more valuable they generally are and 

therefore the larger the lump-sum payment. Conversely, a minimally used feature, with 

all else being equal, will usually command a lower lump-sum payment. In this case, 

Lucent identifies no documentary evidence or testimony showing the parties’ 

expectations as to usage of the claimed method. Lucent submitted no evidence upon 

which a jury could reasonably conclude that Microsoft and Lucent would have 

estimated, at the time of the negotiation, that the patented date-picker feature would 

have been so frequently used or valued as to command a lump-sum payment that 

amounts to approximately 8% of the sale price of Outlook. Cf. Interactive Pictures Corp. 

v. Infinite Pictures, Inc., 274 F.3d 1371, 1384-85 (Fed. Cir. 2001) (accepting as suitable 

factual evidence the patentee’s “business plan and its projections for future sales” 

prepared “two months before infringement began”). 

2008-1485, -1487, -1495 38

Only four of the eight agreements purport to be lump-sum agreements: 

(1) a 1993 agreement between Dell and IBM for $290 million; (2) a 1996 agreement 

between Microsoft and Hewlett-Packard for $80 million; (3) a 1997 agreement between 

Microsoft and Apple Computer for $93 million; and (4) a 1999 agreement between 

Microsoft and Inprise for $100 million. Lucent’s brief characterizes the four agreements 

as covering “PC-related patents,” as if personal computer kinship imparts enough 

comparability to support the damages award. For the latter three, it is impossible for us, 

based on the record, to determine whether the agreements are at all comparable to the 

hypothetical agreement of the present suit. For the first agreement, what little 

explanation there is only underscores the differences between it and any hypothetical 

agreement for the Day patent. 

The 1993 agreement between IBM and Dell appears to be a modification of their 

1988 agreement. These two IBM-Dell agreements are vastly different from any 

agreement Microsoft and Lucent would have struck for the Day patent at the time of 

infringement. As best as we can discern, the 1988 agreement appears to govern IBM’s 

licensing of its entire patent portfolio protecting its one-time dominance in the personal 

computer market. See J.A. 08193 (witness testimony explaining in cursory fashion the 

Dell-IBM agreement); see also Dell Computer Co.: Clones of IBM’s PS/2 Line of 

Computers Announced, The Wall Street Journal, Apr. 19, 1988, at 13 (reporting that 

Dell “became the first company to announce copies of International Business Machines 

Corp.’s year-old Personal System/2 computer line”); Two Companies in Texas Race to 

Clone PS/2, The Wall Street Journal, Apr. 8, 1988, at 20 (reporting that IBM was 

“considering raising the royalty it charges, and plans to be more aggressive in making 

2008-1485, -1487, -1495 40

negotiations . . . would factor into the appropriate royalty for Microsoft’s infringement.” 

Id. The testimony provides no analysis of those license agreements, other than, for 

example, noting the agreement was a cross-license of a large patent portfolio and the 

amount paid. Lucent had the burden to prove that the licenses were sufficiently 

comparable to support the lump-sum damages award. The law does not require an 

expert to convey all his knowledge to the jury about each license agreement in 

evidence, but a lump-sum damages award cannot stand solely on evidence which 

amounts to little more than a recitation of royalty numbers, one of which is arguably in 

the ballpark of the jury’s award, particularly when it is doubtful that the technology of 

those license agreements is in any way similar to the technology being litigated here. 

Lucent also cites four running-royalty license agreements which purportedly 

provide substantial evidence supporting a lump-sum damages award of approximately 

$358 million. A significant shortcoming of these agreements is their “running-royalty” 

nature, however. As we noted above, certain fundamental differences exist between 

lump-sum agreements and running-royalty agreements. This is not to say that a 

running-royalty license agreement cannot be relevant to a lump-sum damages award, 

and vice versa. For a jury to use a running-royalty agreement as a basis to award 

lump-sum damages, however, some basis for comparison must exist in the evidence 

presented to the jury. In the present case, the jury had almost no testimony with which 

to recalculate in a meaningful way the value of any of the running royalty agreements to 

arrive at the lump-sum damages award. 

Additionally, in its brief before us, Lucent appears to misunderstand the nature of 

a per-unit royalty. Lucent appears to consider a per-unit royalty as being equivalent to a 

2008-1485, -1487, -1495 43

product. But no testimony described how the patented technology of the Vox 

agreement relates to the licensed graphics boards. Lucent’s expert never explained to 

the jury whether the patented technology is essential to the licensed product being sold, 

or whether the patented invention is only a small component or feature of the licensed 

product (as is the case here). The jury also had no information about the price of Vox’s 

PC graphics boards and thus was unable to assess the magnitude of the $2.00 rate, 

which seems particularly relevant given Lucent’s defense of an award amounting to 

about 8% of the market value of Outlook. In the absence of the price of graphics 

boards, the $2.00 value is difficult, if not impossible, to evaluate. The testimony of 

Lucent’s expert relating to the Vox agreement was confined essentially to the fact that 

the agreement is a cross-licensing agreement in which the rights granted to Lucent 

were royalty-free and that the royalty rate is structured as a commuted rate. 

The Kenwood agreement, covering two Lucent patents directed to DVD player 

products, is a hybrid lump-sum/running royalty cross-license agreement. Kenwood 

agreed to pay Lucent an up-front payment of $3 million along with a per-unit royalty of 

$1.50 for each product in excess of 300,000 units. Lucent’s expert told the jury that the 

Kenwood agreement was a cross-license, conveying rights to Lucent to practice 

Kenwood’s patents, but the jury never learned anything about those patent rights and 

how valuable or essential those rights were. Even if we were to apply the $1.50 per unit 

rate of the Kenwood agreement to the number of infringing units that could be used to 

infringe in the present case, this would yield only about $165 million, substantially less 

than the $358 million awarded by the jury. 

2008-1485, -1487, -1495 45

functional calendar system, in which a user can record appointments, meetings, and 

other items on one’s schedule. As Lucent’s own expert testified, Outlook is a “personal 

organizer” that is “an integrated suite of abilities to do e-mail, to set up contacts, to 

arrange meetings, to maintain your personal calendar, et cetera.” In short, Outlook is 

an enormously complex software program comprising hundreds, if not thousands or 

even more, features. We find it inconceivable to conclude, based on the present record, 

that the use of one small feature, the date-picker, constitutes a substantial portion of the 

value of Outlook. 

The parties presented little evidence relating to Factor 13. Nonetheless, the only 

reasonable conclusion is that most of the realizable profit must be credited to 

non-patented elements, such as “the manufacturing process, business risks, or 

significant features or improvements added by [Microsoft].” As explained by Microsoft’s 

expert Mr. Kennedy, Outlook consists of millions of lines of code, only a tiny fraction of 

which encodes the date-picker feature. Although the weighing of Factor 13 cannot be 

reduced to a mere counting of lines of code, the glaring imbalance between infringing 

and non-infringing features must impact the analysis of how much profit can properly be 

attributed to the use of the date-picker compared to non-patented elements and other 

features of Outlook. Here, numerous features other than the date-picker appear to 

account for the overwhelming majority of the consumer demand and therefore 

significant profit. 

The only reasonable conclusion that can be drawn from this evidence is that the 

infringing use of Outlook’s date-picker feature is a minor aspect of a much larger 

software program and that the portion of the profit that can be credited to the infringing 

2008-1485, -1487, -1495 49

In Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 698 

(1933), the Supreme Court recognized that factual developments occurring after the 

date of the hypothetical negotiation can inform the damages calculation: 

[A] different situation is presented if years have gone by before the 

evidence is offered. Experience is then available to correct uncertain 

prophecy. Here is a book of wisdom that courts may not neglect. We find 

no rule of law that sets a clasp upon its pages, and forbids us to look 

within. 

Similarly, our case law affirms the availability of post-infringement evidence as probative 

in certain circumstances. In Fromson v. Western Litho Plate & Supply Co., 853 F.2d 

1568, 1575 (Fed. Cir. 1988), overruled on other grounds by Knorr-Bremse Systeme 

Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc), 

we observed that the hypothetical negotiation analysis “permits and often requires a 

court to look to events and facts that occurred thereafter and that could not have been 

known to or predicted by the hypothesized negotiators.” 

Consideration of evidence of usage after infringement started can, under 

appropriate circumstances, be helpful to the jury and the court in assessing whether a 

royalty is reasonable. Usage (or similar) data may provide information that the parties 

would frequently have estimated during the negotiation. See Sinclair Ref., 289 U.S. at 

697 (“The use that has been made of the patented device is a legitimate aid to the 

appraisal of the value of the patent at the time of the breach.”). Such data might, 

depending on the case, come from sales projections based on past sales, consumer 

surveys, focus group testing, and other sources. Even though parties to a license 

negotiation will usually not have precise data about future usage, they often have rough 

estimates as to the expected frequency of use. This quantitative information, assuming 

2008-1485, -1487, -1495 51

it meets admissibility requirements, ought to be given its proper weight, as determined 

by the circumstances of each case. 

On the other hand, we have never laid down any rigid requirement that damages 

in all circumstances be limited to specific instances of infringement proven with direct 

evidence. Such a strict requirement could create a hypothetical negotiation far-removed 

from what parties regularly do during real-world licensing negotiations. As shown by the 

evidence in this case, companies in the high-tech computer industry often strike 

licensing deals in which the amount paid for a particular technology is not necessarily 

limited to the number of times a patented feature is used by a consumer. A company 

licensing a patented method often has strong reasons not to tie the royalty amount 

strictly to usage. The administrative cost of monitoring usage can be prohibitively 

expensive. Furthermore, with some inventions, say for example a method of detecting 

fires, value is added simply by having the patented invention available for use. Cf. 

Hanson, 718 F.2d at 1080-81 (approving a reasonable royalty not based on “actual use 

of the snowmaking machinery” but on what a party would have paid to have the 

machine available to use). Thus, potential licensors and licensees routinely agree to 

royalty payments regardless of whether the invention is used frequently or infrequently 

by the consumer. 

With the foregoing in mind, we observe that the evidence of record is 

conspicuously devoid of any data about how often consumers use the patented date- 

picker invention. In one respect, Lucent believes the damages award is supported by 

the pervasive use of forms throughout the three software programs. What this position 

lacks is the requisite focus on the infringed claim. The damages award can’t be 

2008-1485, -1487, -1495 52

supported by evidence that the infringers also used additional, non-infringing features. 

Only when the date-picker is used to fill out a form does infringement occur. All other 

means of filling out a form, such as typing in the entire date, do not infringe. The 

damages award ought to be correlated, in some respect, to the extent the infringing 

method is used by consumers. This is so because this is what the parties to the 

hypothetical negotiation would have considered. Lucent tries to stretch the claim scope 

so that claim 19 covers all pop-up tools. If this were the proper claim construction, we 

might have to reverse the validity ruling. But the claim construction—which neither 

party has appealed—is not so broad. 

Furthermore, Lucent’s reliance on Dynacore is unavailing. As we noted above, 

substantial evidence supports the jury’s verdict of indirect infringement by Microsoft. 

But all the circumstantial evidence supports is the jury’s implicit finding that at least one 

person performed the patented method one time in the United States sometime during 

the relevant period. Beyond that finding, all the jury had was speculation. No evidence 

describes how many Microsoft Outlook users had ever performed the patented method 

or how many times. Lucent had the burden to prove that the extent to which the 

infringing method has been used supports the lump-sum damages award. 

4. Other Factors 

Other Georgia-Pacific factors applicable here include “[t]he nature and scope of 

the license, as exclusive or nonexclusive” (Factor 3); “[t]he licensor’s established policy 

and marketing program to maintain his patent monopoly” (Factor 4); “[t]he commercial 

relationship between the licensor and the licensee” (Factor 5); “[t]he established 

profitability of the product made under the patent” (Factor 8); “[t]he utility and 

2008-1485, -1487, -1495 53

advantages of the patent property over the old modes or devices” (Factor 9); and “[t]he 

portion of the profit or of the selling price that may be customary . . . to allow for the use 

of the invention” (Factor 12). 318 F. Supp. at 1120. To the extent these factors are 

relevant, they appear somewhat to offset one another. 

For instance, Factor 8, the profitability of the product made, supports a higher 

versus a lower reasonable royalty, given the unrebutted evidence that the products at 

issue are sold with an approximately 70-80% profit margin. Contrasting this evidence 

are Factors 3 and 9. Non-exclusive licenses generally command lower royalties. 

See Parr, supra, at 64 (“Typically, higher royalty rates are associated with license 

agreements that provide the licensee with exclusive rights to use the IP.”). And, from 

the evidence presented, the infringing use of the date-picker seems to have, at best, 

only a slight advantage over what is arguably the closest prior art. We are mindful, 

however, that a jury could have reasonably concluded otherwise with several of the 

factors mentioned here. Even so, such reasonable conclusions, in this case, cannot 

overcome the substantial infirmities in the evidence for the other factors detailed above. 

5. Conclusion on Lump-Sum Reasonable Royalty 

Having examined the relevant Georgia-Pacific factors, we are left with the 

unmistakable conclusion that the jury’s damages award is not supported by substantial 

evidence, but is based mainly on speculation or guesswork. When the evidence is 

viewed in toto, the jury’s award of a lump-sum payment of about $358 million does not 

rest on substantial evidence and is likewise against the clear weight of the evidence. 

The evidence does not sustain a finding that, at the time of infringement, Microsoft and 

Lucent would have agreed to a lump-sum royalty payment subsequently amounting to 

2008-1485, -1487, -1495 54

approximately 8% of Microsoft’s revenues for the sale of Outlook (and necessarily a 

larger percentage of Outlook’s profits). We need not identify any particular Georgia- 

Pacific factor as being dispositive. Rather, the flexible analysis of all applicable 

Georgia-Pacific factors provides a useful and legally-required framework for assessing 

the damages award in this case. Furthermore, we do not conclude that the 

aforementioned license agreements (or other evidence) cannot, as a matter of law, 

support the damages award in this case. Instead, the evidence as presented did not 

reach the “substantial evidence” threshold and therefore no reasonable jury could have 

found that Lucent carried its burden of proving that the evidence, under the relevant 

Georgia-Pacific factors, supported a lump-sum damages award of $357,693,056.18. 

We admit that the above analysis focuses on Microsoft Outlook, not the other two 

software programs. Because the damages award with respect to infringement by 

Outlook is not supported by the evidence but is against the clear weight of the evidence, 

a new trial on damages is necessary. We therefore need not specifically address the 

evidence as it relates to Microsoft Money and Windows Mobile. We leave that to the 

jury or court to assess on remand. We acknowledge that the factual findings based on 

the pertinent Georgia-Pacific factors may not be identical for all three products. For 

example, the tools that practice the infringing method may be incorporated more (or 

less) extensively throughout Windows Mobile and Microsoft Money than in Outlook. 

Creating a licensing agreement for patented technology is, at best, an inexact 

science. In actual licensing negotiations, willing parties negotiating at arms-length do 

not necessarily generate and analyze precise economic data concerning the perceived 

value of a patented invention. A complicated case this was, and the damages evidence 

2008-1485, -1487, -1495 55

of record was neither very powerful, nor presented very well by either party. Most jury 

damages awards reviewed on appeal have been held to be supported by substantial 

evidence. See Skenyon et al., supra, at § 3:20 (summarizing sixty-two damages 

cases). Nonetheless, on post-trial JMOL motions, district court judges must scrutinize 

the evidence carefully to ensure that the “substantial evidence” standard is satisfied, 

while keeping in mind that a reasonable royalty analysis “necessarily involves an 

element of approximation and uncertainty.” Unisplay, 69 F.3d at 517. 

B. Entire Market Value Analysis 

Microsoft argues that the damages award must be reversed because the jury 

erroneously applied the entire market value rule. Despite the jury’s indication on the 

verdict form that it was awarding a lump-sum reasonable royalty, Microsoft believes that 

the only way the jury could have calculated a figure of $357,693,056.18 was by applying 

a royalty percentage to a total sales figure of the infringing software products. Indeed, it 

is difficult to understand how the jury could have chosen its lump-sum figure down to the 

penny unless it used a running royalty calculation. Furthermore, as Microsoft explains 

in its brief, working the math backwards strongly suggests that the jury must have used 

some calculation of a rate applied to the entire market value of the software. See 

Microsoft Response and Reply Br. 47 (“Applying Lucent’s 8% rate to all of Microsoft’s 

sales and half of Dell’s, using a weighted average of 85% OEM prices and 15% retail 

prices, yields damages of $358,835,648—extremely close to the jury’s award.” (footnote 

omitted)). Alternatively, the jury could have simply used a somewhat lower rate, such 

as about 5.5%, applied to the total sales figure. Assuming that the jury did apply the 

entire market value rule, such application would amount to legal error for two reasons. 

2008-1485, -1487, -1495 56

The Entire Market Value Rule 

Darin Snyder 

O’Melveny & Myers LLP 

September 29, 2009

Goal of the Entire Market Value Rule 

“The entire market value rule allows for the 

recovery of damages based on the value of 

an entire apparatus containing several 

features, when the feature patented 

constitutes the basis for customer demand.” 

TWM Mfg., 789 F.2d at 901.

Proving “The Basis For Customer Demand” 

• Make comparisons with other parts of product 

– number and importance 

• Prove individual purchasing decisions 

• Conduct surveys 

• Construct demand curves 

• Choose the right “product” 

• Avoid being obviously results oriented

Did Lucent Change the Rule? 

• “This issue of royalty base is not to be confused with 

the relevance of anticipated collateral sales to the 

determination of a reasonable royalty rate.” Rite-Hite 

Corp. v. Kelly Co., 56 F.3d 1538,1549 n.9 (Fed. Cir. 

1995) 

• Lucent recognizes the connection between the 

royalty base and the royalty rate 

• Judge Radar in Cornell v. HP treats them as 

independent

The “25% Rule” 

• The “25% Rule” sets a royalty at 25% of the 

profits from an infringing product. 

• Can the “25% Rule” survive Lucent?

Trends in Federal Circuit Patent Damages Decisions

Create successful ePaper yourself

Delete template?

Save as template?