Feature Comment: The Impact of Uniloc USA, Inc. v. Microsoft Corp. on Patent Damages under 28 U.S.C. §1498(a)

By James G. McEwen[1] While many of the aspects of infringement claims against the Government have seemingly similar elements to actions against private parties under 35 U.S.C. §271, it is important to understand that 28 U.S.C. §1498(a) is not an exact counterpart to 35 U.S.C. §271.  For instance, 28 U.S.C. §1498(a) does not allow for actions against the Government for inducement and contributory infringement, or infringement through infringement of product by process claims.[2]  At the same time, the Government is directly liable for infringement by its contractors if the Government has authorized and consented to such uses of the patented invention, which outside of claims of inducement, contribution, or vicarious liability, does not exist in private party litigation under 35 U.S.C. §271.  The requirement for such authorization and consent claims is to ensure that the Government is able to secure contractor-provided goods and services by extending its immunity to contractors and thereby ensure that the contractors cannot be enjoined.[3] This

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Federal Circuit Clarifies Damages For Patent Infringement

Federal Circuit Finds 25% Damages Rule Is Too Unreliable to be Used In Calculating Patent Damages In Uniloc USA, Inc. v. Microsoft Corp., Civ Case No. 2010-105, -1055 (Fed. Cir. January 4, 2011), Uniloc owns U.S. Patent No. 5,490,216 (“’216 patent”), which is drawn to a registration system designed to prevent illegal software copying.  Specifically, the ‘216 patent discloses a program which only allows software to run without restrictions on a system when the system determines that the software is legitimate.  Microsoft includes a Product Activation feature in its Windows XP software and accompanying software which requires the use of a product key which, if valid, allows unrestricted use of the software, and if not valid, only allows use of the software in a demo mode. Uniloc sued Microsoft in the District of Rhode Island alleging that the Product Activation feature infringed the ‘216 patent.   After a first remand from the Federal Circuit rejecting the District Court’s initial claim construction,

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Federal Circuit Rejects Ensnarement Defense and Finds that the Ensnarement Defense is an Issue of Law

In DePuy Spine, Inc. v. Medtronic, Inc., Civ. Case Nos. 90 USPQ2d 1865 (Fed. Cir. 2009), DePuy owns U.S. Pat. No. 5,207, 678 (the ‘678 patent).  The ‘678 patent is directed to a medical device that is a pedicle screw used in spinal surgeries.  DePuy sued Medtronic, accusing Medtronic of infringing the ‘678 patent with Medtronic’s Vertex pedicle screws.  The U.S. District Court for the District of Massachusetts denied Medtronic’s ensnarement defense, found that Medtronic engaged in litigation misconduct, with both decisions being appealed before the Federal Circuit Court.  Additionally, DePuy cross-appeals from the District Court’s granting of Medtronic’s motion for judgment as a matter of law (JMOL) of no willful infringement and from the denial of DePuy’s motion for a new trial for reasonable royalty damages.  In a prior appeal, the Federal Circuit Court upheld the District Court’s granting of summary judgment as per Medtronic not literally infringing the ‘678 patent with Medtronic’s Vertex pedicle screws.  However, the Federal

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Federal Circuit Finds Reduction of Compensatory Damages Requires New Trial By Jury and that Actual Notice of Infringement Can Occur With a Qualified Charge of Infringement

In Minks v. Polaris Industries, Inc., 546 F.3d 1364 (Fed. Cir. 2008), Floyd M. Minks (“Minks”) designs electronic components for all-terrain vehicles.  Minks holds U.S. Patent No. 4,664,080 (“the ‘080 patent”), which is drawn to an electric governor system for internal combustion engines which uses a circuit to limit the reverse speed of an all-terrain vehicle (“ATV”). When the ATV is shifted into reverse gear, the reverse speed limiter circuit senses the direct current (DC) voltage.  Once activated, the circuit also senses the alternator’s alternating current (AC) output to thereby sense engine speed. If the alternator’s AC voltage output exceeds a predetermined limit, the circuit emits a control signal to interrupt the ignition of the engine. Polaris Industries (“Polaris”) is a manufacturer of ATV’s and a purchaser of Mink’s electrical components since about 1970. In 1996, Polaris engaged Minks in discussions regarding the ‘080 patent and its ability to purchase reverse speed limiters from different manufacturers. Minks responded by informing

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Parent Corporation Cannot Recover Lost Profits of Subsidiary When Subsidiary is Non-Exclusive Licensee of Parent’s Patent

In Mars, Inc v. Coin Acceptors, Inc., Nos. 07-1409, -1436 (Fed. Cir. June 2, 2008), Mars, Inc., a U.S. based candy company producing popular treats such as M&Ms and Milky Way bars, developed and obtained patents on a technique for identifying coins deposited in a vending machine.  Mars does not produce any vending machines itself but created a wholly-owned subsidiary, Mars Electronics International (MEI), to produce the machines.  Mars licensed MEI to use its patents in the design of its vending machines. Mars maintained consolidated financial statements reflecting the incomes of all its subsidiaries.  However, Mars licensed MEI to use its patents on a royalty basis per gross sales.  Thus Mars would receive revenue regardless of whether MEI turned a profit or not.  As will be described below, the Federal Circuit found this fact particularly compelling in finding that there was not a significantly direct flow of profits from MEI to Mars. A competing vending machine manufacturer, Coin Acceptors, Inc.

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