Microsoft gets more practice defending IP damages and lost profits claims

If you’ve been following our coverage of Microsoft’s recent success in Lucent Technologies, Inc. v. Gateway, Inc. (see BVWire# 84-2)—in which the court tossed out a $358 million verdict against the mega-computer company for lack of sufficient financial evidence supporting the patent infringement claims—then you may interested in a new case, in which the jury assessed $200 million against Microsoft for patent damages.

In i4i Ltd. Partnership v. Microsoft Corp., 2009 WL 2449024, the jury found that some of Microsoft’s WORD 2003 products and all of WORD 2007 infringed a patented XCL editing technology. To calculate damages, it heard from two experts: one who conducted a market survey to determine consumer usage of the accused products; and a second who looked at a benchmark product (XMetaL) to develop a reasonable royalty rate. On appeal, Microsoft argued that the survey was unreliable hearsay, the benchmark product was not a valid comparable, and the damages expert used an improper rule of thumb (assuming the patentee would receive 25% of the infringer’s profits). The federal district court (E.D. Tex.) disagreed, however, and affirmed the $200 million award on August 11, 2009.

Microsoft must have had its appeal papers ready, because not two week later, it delivered its opening brief to the U.S. Court of Appeals for the Federal Circuit—the same court that reversed the award jury in Lucent v. Gateway. Interestingly, Microsoft’s brief asserts that the expert’s survey was based on “just” 19 telephone responses, and the XMetaL comparable sold for triple the amount of most WORD products. The plaintiff filed its response on Sept 9, 2009, followed by Microsoft’s reply on September 14, 2009. Stay tuned…