Uniloc USA, Inc. et al. v. Microsoft Corporation

Case Overview and Background

This landmark patent infringement suit was initiated in 2003 by Uniloc, a prolific patent assertion entity (PAE), against software giant Microsoft Corp. in the U.S. District Court for the District of Rhode Island. Uniloc, founded in Australia by inventor Ric Richardson, alleged that Microsoft's product activation feature—a key anti-piracy tool in its widely used Windows XP and Office software suites—infringed on its patent for preventing unauthorized software copying. The case pitted a major operating company, Microsoft, against a plaintiff frequently described as a "patent troll," which acquires patents for the purpose of litigation and licensing rather than producing its own technology. The specific patent at issue was U.S. Patent No. 5,490,216, which covers a system for software registration that uses a unique ID generated from the user's specific hardware to prevent the software from being used on multiple machines. The case was presided over by Judge William E. Smith.

The procedural history of the case was complex, involving multiple appeals to the Court of Appeals for the Federal Circuit. A jury initially found Microsoft's infringement to be willful and awarded Uniloc a staggering $388 million in damages in April 2009, which at the time was one of the largest patent verdicts in U.S. history. However, the district court later granted Microsoft's motion for judgment as a matter of law (JMOL), overturning the infringement and willfulness findings. On appeal, the Federal Circuit reinstated the jury's infringement verdict but affirmed the JMOL of no willfulness. Crucially, the appellate court vacated the massive damages award and ordered a new trial on that issue. Before a new trial on damages could commence, the parties reached a confidential settlement in March 2012.

The Uniloc v. Microsoft case is notable primarily for its profound impact on the calculation of patent damages. In its January 2011 decision, the Federal Circuit categorically rejected the long-standing "25 percent rule of thumb" as a method for determining a reasonable royalty. This rule, which suggested a patent holder was entitled to roughly 25 percent of the licensee's expected profits, was deemed "a fundamentally flawed tool" and inadmissible because it was untethered to the specific facts of the case. The court also heavily criticized the plaintiff's use of the "entire market value rule," where Uniloc's expert improperly used the total $19 billion revenue of Microsoft's products as a "check" for the damages calculation, arguing it could "skew the damages horizon for the jury." This ruling significantly tightened the standards for patent damages calculations, requiring that royalty demands be based on the specific value contributed by the patented feature, not the total value of the end product, unless that feature is the primary driver of customer demand.

Legal Developments and Outcome

This patent infringement litigation between Uniloc and Microsoft was a long and complex case marked by multiple appeals and a landmark Federal Circuit decision on damages calculations. The case ultimately settled before a second trial on damages could take place.

Filing & Initial Pleadings

• 2003-09-04: Uniloc USA, Inc. and Uniloc Singapore Private Limited (collectively, "Uniloc") filed a complaint in the U.S. District Court for the District of Rhode Island, alleging that Microsoft's Product Activation feature in its Windows XP and Office XP software infringed U.S. Patent No. 5,490,216 ('216 patent). This patent relates to a system for preventing software piracy. Microsoft denied infringement and asserted that the '216 patent was invalid.

Claim Construction & First Summary Judgment

• 2006-08-15: The district court issued its claim construction (Markman) ruling, defining key terms in the '216 patent, including "licensee unique ID generating means." The court construed this as a means-plus-function claim with the structure being a "summation algorithm or a summer and equivalents thereof." This construction was central to the subsequent summary judgment ruling. (See Uniloc USA, Inc. v. Microsoft Corp., 447 F. Supp. 2d 177 (D.R.I. 2006)).
• 2007-10-19: Based on its claim construction, the district court granted Microsoft's motion for summary judgment of non-infringement. The court found that the algorithm used in Microsoft's Product Activation feature was not a "summation algorithm" as required by the court's claim construction, and therefore did not infringe the '216 patent.

First Appeal & Reversal

• 2008-08-29: Uniloc appealed the summary judgment ruling to the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit, in a non-precedential decision, reversed the district court's grant of summary judgment. The appellate court held that Uniloc had presented sufficient evidence to create a genuine issue of material fact as to whether Microsoft's algorithm was equivalent to the "summation algorithm" described in the patent, and remanded the case for a jury trial. (See Uniloc USA, Inc. v. Microsoft Corp., 290 Fed. Appx. 337 (Fed. Cir. 2008)).

Trial, Verdict, and Post-Trial Motions

• 2009-04-08: Following a trial on remand, a jury found that Microsoft had willfully infringed the '216 patent and awarded Uniloc $388 million in damages. This was one of the largest patent verdicts at the time.
• 2009-09-29: District Judge William E. Smith granted Microsoft's post-trial motion for Judgment as a Matter of Law (JMOL), overturning the jury's verdict. The court ruled that no reasonable jury could have found infringement. The court also granted JMOL of no willfulness and, in the alternative, a new trial on infringement, willfulness, and damages. (See Uniloc USA, Inc. v. Microsoft Corp., 640 F. Supp. 2d 150 (D.R.I. 2009)).

Second Appeal & Landmark Damages Ruling

• 2011-01-04: Uniloc again appealed to the Federal Circuit. In a significant and precedential decision, the Federal Circuit largely sided with Uniloc on the issue of infringement but agreed with the district court on damages. The court:
  • Reversed the JMOL of non-infringement, reinstating the jury's finding that Microsoft infringed the '216 patent. The court found that substantial evidence supported the jury's verdict.
  • Affirmed the JMOL of no willful infringement, finding that the complex legal and technical issues gave Microsoft a reasonable basis to believe it did not infringe.
  • Affirmed the grant of a new trial on damages. This part of the ruling became highly influential. The court took the opportunity to reject the "25 percent rule of thumb" for calculating reasonable royalty damages, which Uniloc's expert had used. It also criticized the expert's use of the entire market value of Microsoft's software ($19 billion) as a "check" on the damages calculation, holding that the patented feature must be the basis for customer demand to use the entire market value rule. (See Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011)).
• 2011-03-22: The Federal Circuit denied Uniloc's petition for rehearing.

Settlement

• 2012-03: With the infringement verdict reinstated and the case remanded to the district court for a new trial solely on the amount of damages, the parties entered into a confidential settlement. On 2012-03-27, the parties filed a joint stipulation of dismissal with prejudice, formally ending the litigation.

Parallel PTAB Proceedings

There were no parallel PTAB proceedings, such as inter partes reviews (IPRs), during the pendency of this litigation, as the America Invents Act (AIA) which created these proceedings was passed in late 2011 and its IPR provisions became effective after the case settled. However, much later, starting in 2014, third parties (including Sega, Ubisoft, and Kofax) filed IPR petitions against the '216 patent, eventually leading to the invalidation of certain claims. These later proceedings had no effect on the outcome of the settled litigation between Uniloc and Microsoft.

I'll search for press coverage of this case across multiple angles.

Press coverage of Uniloc v. Microsoft

The verdict and its reversal (2009). Coverage of the April 2009 jury verdict framed it in record-book terms. Guru3D reported that Uniloc won after "six years of legal skirmishes and a trial starting in March," that the jury found Microsoft "infringed Uniloc's patent on software that generates unique identities for licensed users and prevents unauthorized use or copying of programs," and that the award was "one of the largest on record in patent law disputes"; it also carried Microsoft's statement that "we believe that we do not infringe, that the patent is invalid and that this award of damages is legally and factually unsupported. We will ask the court to overturn the verdict." When Judge Smith did overturn it, Rhode Island Lawyers Weekly reported on 2009-10-08 that the judge acted on his "firm belief (indeed a certitude)" that the jury "lacked a grasp of the issues before it," summarizing the 66‑page decision and noting Microsoft's argument that the award was "purportedly the fifth largest patent verdict in history." Harvard's Journal of Law & Technology digest noted that the case "has attracted much attention for its magnitude and implications," and that the reversal "may support the argument for a patent-focused court, as the Court found that jury members were not able to sufficiently understand the technical details and legal issues to reach a reliable verdict." Stanford Law School later recapped that the '216 patent "was nearly one of the most valuable patents to make its way to court last year" before the award was tossed.

The January 2011 Federal Circuit decision and the death of the 25% rule. IPWatchdog headlined its analysis "Microsoft Wins at CAFC, 25% Reasonable Royalty Rule Dies," observing that although the court upheld infringement of claim 19 and validity, "it was Microsoft who was the big winner here," and predicting the eventual recovery would be "far less than the $388 million, particularly given the Federal Circuit threw out the 25 percent rule and said the entire market value rule was not applicable in this case." Clayton Utz (via Lexology) framed the ruling as a client win for Uniloc and inventor Ric Richardson, quoting the court's holding that "the 25 percent rule of thumb is a fundamentally flawed tool … thus inadmissible under Daubert," and noting the $388 million was "said to be the fifth largest patent verdict in history." Fish & Richardson emphasized the base-side holding — "The Supreme Court and this court's precedents do not allow consideration of the entire market value of accused products for minor patent improvements simply by asserting a low enough royalty rate" — while an unnamed firm's Lexology alert of 2011-01-13 warned practitioners that pending damages opinions and valuations relying on the rule "need to be reviewed and revised accordingly." Two decades on, IPWatchdog (2026-10-26) still treats Uniloc alongside LaserDynamics as a cornerstone of entire-market-value doctrine, noting the decisions "emphasized that the use of the entire product as a royalty base is permissible only where the patented feature drives demand for the entire product" and "highlighted the risk that presenting large revenue figures to a [jury]" would distort the damages horizon.

The March 2012 settlement. The settlement was announced by Microsoft rather than in a press release from the court. The Age reported on 2012-03-15 that the damages retrial in Providence "was withdrawn by both parties as it got under way," with Microsoft spokesman David Cuddy telling Bloomberg News that Uniloc had reached a "final and mutually agreeable resolution"; the paper said the deal "could potentially net hundreds of millions of dollars," that "the deal is a licensing agreement … with Richardson saying the deal didn't involve a lump sum payment," and quoted IP expert Trevor Choy estimating "low 9 figures" because "[t]he 2009 order of $US388 million sets a rough ceiling." The Echo put it at "most likely for more than $100 million." Techpartner News (James Hutchinson, 2012-03-09) added two numbers not in the opinions: that "Uniloc had initially sought up to US$564 million in damages," and that the case began "when Uniloc sought damages from Microsoft for infringing the patent to create software worth up to US$19 billion in market value"; it also quoted Richardson's blog ("Its over!") and his comment that the result would "be as valuable as I could expect." Australian outlets (Daily Telegraph, ChannelNews) leaned heavily on the inventor's personal story ("man in a van," the "DickMobile") and on stock speculation about the payout; Ars Technica (July 2012) mentioned in passing that Uniloc's "eight-year lawsuit against Microsoft ended in March when the Redmond giant agreed to settle under undisclosed terms," calling the appellate ruling "a landmark decision that eliminated the so-called 25 percent rule."

Where accounts diverge, and what goes beyond the record. Payout figures are entirely journalistic: no settlement amount was disclosed, so the "$100 million-plus," "low nine figures," and "hundreds of millions" numbers are expert speculation or headline framing, and the widely repeated "$564 million sought" figure appears in trade coverage rather than in the Federal Circuit opinion (which recites a $565 million expert opinion). There is a factual slip worth flagging: the Clayton Utz client alert dates the verdict to "August 2009," whereas the verdict was returned in April 2009 — consistent with the previously generated timeline, not the alert. Conversely, the Rhode Island Lawyers Weekly report of the JMOL decision names "Providence attorney Andria Coletta" for the plaintiff and "Frank Scherkenbach of Boston" arguing for Microsoft — neither of which appears in the counsel sections above (which list Finnegan/Mintz for Uniloc and Keker/Wilmer/Pierce Atwood for Microsoft); that discrepancy should be resolved against the docket before the counsel lists are treated as complete. On the merits, the press reaction split along predictable lines: defense-side and law-firm commentary (Benesch, Fish & Richardson) read Uniloc as part of a deliberate tightening trend, while the rule's own architect, Robert Goldscheider, published a rebuttal in the Duke Law & Technology Review arguing the court had imperiled "hundreds of relationships" and hoping the district court on remand would limit the holding to the "Rule of Thumb" only. Separately, IAM (Chuck Fish and John Hintz) pushed back on the "commentators [who] have claimed that the Uniloc decision is part of a continuing trend towards devaluing patents," calling that view "more than a little hysterical."

A note on the supplied article list: of those items, I could verify that the IPWatchdog EMVR piece discusses this case directly. The remaining listed pieces (Avery Dennison, EcoFactor, the 2020 and 2022 "Patent Filings Roundup" entries, "Six Steps to Building Litigation-Robust Patents," the IoMT JD Supra piece, and Investopedia's "25% Rule" explainer) are general industry or doctrine items whose connection to Uniloc v. Microsoft I could not confirm from search results, so I have not attributed any claims to them.

Sources

• irbis.fips.ru
• Web ИРБИС
• Uniloc v. Microsoft: Massive Patent Verdict Overturned - Uniloc v. Microsoft: Massive Patent Verdict Overturned
• irbis.fips.ru
• Home > Publications and News > News > Clayton Utz client Uniloc wins patent infringement case against Microsoft
• 【七星天观察】出大事了！腾讯在美被诉侵权，关系到亿万微信用户
• office Archives
• $388 million verdict struck down
• IPWatchdog Articles Archives - Posts in IPWatchdog Articles
• 微软与新加坡Uniloc和解反盗版软件专利诉讼
• Microsoft settles over Aussie-invented patent
• Aussie inventor settles with Microsoft in patent dispute - Advertisement

During the lengthy litigation culminating in a 2012 settlement, Uniloc was represented by attorneys from several prominent law firms. Counsel changed over the course of the case, particularly between the initial district court proceedings and the crucial Federal Circuit appeals.

Lead Appellate Counsel

• Name: Donald R. Dunner (now deceased)

  • Role: Lead Counsel (at the Federal Circuit).
  • Firm: Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Washington, D.C. office).
  • Note: A renowned leader of the intellectual property bar, Dunner argued frequently before the Federal Circuit and was instrumental in shaping patent law. He was noted as the lead attorney for Uniloc in press coverage of the successful appeal.

• Name: Don O. Burley

  • Role: Counsel.
  • Firm: Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Palo Alto, CA office).
  • Note: Burley has extensive experience in patent litigation and appeals, representing clients in the technology sector. He was listed on the Federal Circuit appeal briefs.

• Name: Erik R. Puknys

  • Role: Counsel.
  • Firm: Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Palo Alto, CA office).
  • Note: Puknys has a practice focused on patent litigation and appeals, particularly within the software and electronics industries. He was named on the appellate briefs for Uniloc.

• Name: Aaron J. Capron

  • Role: Counsel.
  • Firm: Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Palo Alto, CA office).
  • Note: His work often involves complex patent cases before district courts and the Federal Circuit. He was also on the briefs for the successful appeal.

Of Counsel (at the Federal Circuit)

• Name: Paul J. Hayes

  • Role: Of Counsel.
  • Firm: Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC (Boston, MA office).
  • Note: A veteran IP litigator, Hayes has represented numerous technology clients in high-stakes patent disputes. He was listed as of counsel on the appellate briefs.

• Name: Dean G. Bostock

  • Role: Of Counsel.
  • Firm: Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC (Boston, MA office).
  • Note: Bostock's practice concentrates on intellectual property litigation. He was listed as of counsel on the briefs submitted to the Federal Circuit.

Other Identified Counsel

Information regarding the full trial and local counsel team in the District of Rhode Island is not as prominent in the publicly available appellate records. However, other attorneys have been associated with Uniloc's broader litigation campaigns.

• Name: Robert D. Cohan

  • Role: It is not specified in the search results what role he played in this particular case.
  • Firm: Cohan Plaut Rajsich LLP (formerly Cohan Plaut LLP) (Boston, MA).
  • Note: Cohan is a seasoned business litigator with experience in intellectual property and trade secret misuse cases.

• Name: Sean M. Callagy

  • Role: It is not specified in the search results what role he played in this particular case.
  • Firm: Arnold & Porter; formerly founder of Callagy Law.
  • Note: Callagy has a broad commercial litigation practice that includes intellectual property matters such as patent, copyright, and trade secret law.

Defendant's Counsel of Record: Microsoft Corporation

Microsoft was represented by a combination of national and local counsel from several prominent law firms. The team changed over the course of the lengthy litigation, which spanned from 2003 to the 2012 settlement.

Lead National Counsel:

• Robert A. Van Nest (Lead Counsel)

  • Firm: Keker, Van Nest & Peters LLP (San Francisco, CA)
  • Note: Van Nest is a nationally recognized trial lawyer known for representing major tech companies in high-stakes intellectual property and commercial disputes.

• Steven F. Cherry (Lead Counsel)

  • Firm: Wilmer Cutler Pickering Hale and Dorr LLP (Boston, MA)
  • Note: Cherry is a seasoned patent litigator with extensive experience in software, electronics, and medical device cases.

• Joseph J. Mueller (Of Counsel)

  • Firm: Wilmer Cutler Pickering Hale and Dorr LLP (Boston, MA)
  • Note: Mueller co-chairs his firm's Intellectual Property Department and focuses on complex patent litigation for technology companies.

• Richard M. Gelb (Of Counsel)

  • Firm: Wilmer Cutler Pickering Hale and Dorr LLP (New York, NY)
  • Note: Gelb's practice concentrates on intellectual property and technology-related litigation and counseling.

Local Counsel:

• John E. Bulman (Local Counsel)

  • Firm: Pierce Atwood LLP (Providence, RI)
  • Note: Bulman served as local counsel in Rhode Island, handling court appearances and filings in the district.

• Steven M. Richard (Local Counsel)

  • Firm: Tillinghast Licht LLP (Providence, RI)
  • Note: Richard also acted as local counsel for Microsoft in the District of Rhode Island proceedings.

Counsel on Appeal (Federal Circuit):

• Carter G. Phillips (Lead Appellate Counsel)

  • Firm: Sidley Austin LLP (Washington, D.C.)
  • Note: A renowned appellate specialist, Phillips has argued more cases before the U.S. Supreme Court than any other lawyer in private practice.

• Constantine L. Trela, Jr. (Appellate Counsel)

  • Firm: Sidley Austin LLP (Chicago, IL)
  • Note: Trela has extensive experience in appellate litigation, particularly in patent and commercial cases.

In-House Counsel:

• Isabella Fu (In-House Counsel)

  • Role: Associate General Counsel at Microsoft Corporation
  • Note: Managed major patent litigation for Microsoft during this period.

• Thomas C. Rubin (In-House Counsel)

  • Role: Associate General Counsel at Microsoft Corporation
  • Note: Rubin was involved in managing Microsoft's intellectual property litigation portfolio.