Microsoft Developer on Ulitzer

A Rhode Island district court judge Tuesday struck down a jury verdict ordering Microsoft to pay an obscure Australian developer by the name of Ric Richardson $388 million, reportedly the fifth-largest patent infringement award in history.

In a relatively rare and painstaking post-trial judgment as a matter of law (JMOL), Judge William Smith found Microsoft's patented Production Activation (PA) system, its scheme for defeating illegal copying of Windows and Office, did not infringe on a patent held by Richardson's companies Uniloc Singapore Private Ltd and California-based Uniloc USA Inc.

He said the jury "lacked a grasp of the issues before it and reached a finding without a legally sufficient basis."

Uniloc says it will appeal, but Smith's decision promises Microsoft a new trial on the amount of damages if his decision is overturned.

On reflection, the judge now agrees with Microsoft that Uniloc's insinuations of copying, which he says had no basis in fact, prejudiced the jury and that - in coming to the damages - it ultimately failed to follow his instructions to disregard a Uniloc pie chart showing a total market value of $19.27 billion and Uniloc's contention that Microsoft's liability amounted to a "mere" 2.9% of the whole pie or $564 million.

The entire market value rule only applies, the judge said, when "the feature at issue (here, PA) constitutes the ‘basis for customer demand' or ‘substantially creates the value of the component parts.'" And nobody ever bought Windows or Office because of PA.

The judge said, "Uniloc's argument elevates form over substance. Although Uniloc did not offer a traditional royalty calculated as a percentage of overall product sales, use of a large pie stuffed with desirable features of Windows and Office to make a royalty slice for PA seem small and reasonable, combined with repeated references to the numbers under the guise of a ‘gut-check,' encourages exactly what the rule seeks to prevent - awarding damages far in excess of the contribution of the precise patented invention. Given Uniloc's repeated use of the evidence with both experts and in closing, the impropriety and unfair prejudice is not insignificant. The $19 billion cat was never put back into the bag...in spite of final instructions that the jury ‘may not award damages based on Microsoft's entire revenue from all the accused products in the case.'"

The judge said he is absolutely certain that jury was swayed by the plaintiff's glib, simplistic arguments to find Microsoft guilty of infringement in the first place.

Uniloc's "approach," he said was "to boil down complex computer software programs to a kind of generic word find puzzle that ignores how the allegedly infringing system actually works and, most important, the actual disclosure of [its] ‘216 patent."

The judge's decision this week is the second time that the case has been thrown out. In a summary judgment the same court found Microsoft did not infringe Uniloc patent 5,490,216 in 2007 and the case was only revived on appeal and then on a very narrow basis of how a cryptographic PA algorithm worked.

What started with 24 claims in 2003 when Uniloc filed suit was hanging by just one claim and Judge Smith spends most of his 66-page decision explaining in infinite detail any geek would love - complete with diagrams and a video of Microsoft's expert testimony - exactly how Microsoft's widgetry isn't the same as Uniloc's.

At the same time, however, he denied Microsoft's motion to declare the Uniloc patent invalid.