In this decision, the Federal Circuit shifted precedent and rejected the previously widely used "25 percent rule of thumb"[4] in calculating patent damage awards.
Founded in 1992,[6] their technology is based on a patent granted to Ric Richardson and develops "try and buy" software distributed via magazines[7] and preinstalled on new computers.
In reaching this decision, the court first issued a claim construction ruling, resulting in several terms that contributed to the instant appeal.
The jury returned a verdict of infringement of the '216 patent following a full trial and awarded Uniloc $388 million in damages.
Based on expert testimony at the district level, the court found that the Microsoft's accused product indeed matched close enough in algorithm to deem that infringement had occurred.
[1] The Federal Circuit determined that Uniloc had not presented any evidence demonstrating that Microsoft knew that the algorithms it used infringed on the '216 patent.
However, the Federal Circuit noted that it is subject to criticism on three points:[10] Citing decisions in Lucent v. Gateway[11] and other cases, the Circuit stated that The 25 percent rule fails to do so and cannot be used blindly as it says nothing about a particular negotiation nor the particular technology, industry, or party; the court then noted "the danger of admitting consideration of the entire market value of the accused where the patented component does not create the basis for customer demand", as seen in this case.
[1] One potentially lasting aspect to this case is the court's rejection of the 25 percent rule, finding it "fundamentally flawed".
The effects of rejecting the 25 percent rule precedence would be felt across all industries where patents are utilized to protect intellectual property.
[13] Despite being widely accepted prior to this court decision, the 25 percent rule's rejection will likely lead to new trials on damages from previous lawsuits.