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.

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.