lucent technologies, inc. v. gateway, inc. … · lucent technologies, inc. v. gateway, inc.1303...

1301LUCENT TECHNOLOGIES, INC. v. GATEWAY, INC.Cite as 580 F.3d 1301 (Fed. Cir. 2009)

making authority. Thus, I believe a hear-ing before the RO fulfills the purpose ofthe hearing described in § 3.103(c)(2).

Finally, the EAP does not hamper theRO’s duty to assist a veteran described in§ 3.103(c)(2). Section 3.103(c)(2) providesin pertinent part:

It is the responsibility of the employeeor employees conducting the hearings toexplain fully the issues and suggest thesubmission of evidence which the claim-ant may have overlooked and whichwould be of advantage to the claimant’sposition.

According to § 3.103(c)(2), the VA has theresponsibility to assist the claimant in pro-viding evidence that would support his orher claim. I believe that, when it followsthe EAP, the VA satisfies its responsibilityto assist the claimant. The EAP does notprevent the RO employee conducting thehearing from explaining the issues andsuggesting the submission of evidence ad-vantageous to the claimant. Fast Letter08–24 specifically states that, ‘‘[a]s in otherclaims, Veterans Service Organization rep-resentatives will be permitted the opportu-nity to review the draft rating decision, butonly after the file is returned from C & PService and corrections, if necessary aremade to it.’’ Accordingly, a veteran’s rep-resentative can review the veteran’s fileafter C & P Service review and makesuggestions to the veteran at the hearingbased on that file. In my view, the duty toassist described in § 3.103(c)(2) does notrequire the VA to notify the claimant of C& P Service’s review of a draft decision foran extraordinary award. Indeed, becauseC & P Service applies the same statutesand regulations as the RO, it is unclearhow the mere fact that C & P Servicereviewed a claimant’s file ‘‘would be ofadvantage to the claimant’s position.’’Withholding the fact that C & P Servicereviewed the extraordinary award draftdecision, the RO employee can still ‘‘ex-plain fully the issues and suggest the sub-

mission of additional evidence TTT whichwould be of advantage to the claimant’sposition,’’ thereby fulfilling the duty to as-sist described in § 3.103(c)(2).

For the foregoing reasons, I respectfullydissent from the majority’s decision to in-validate the EAP outlined in Fast Letters07–19 and 08–24.

,

LUCENT TECHNOLOGIES, INC.,Plaintiff/Counterclaim Defen-

dant–Cross Appellant,

and

Lucent Technologies Guardian I LLC,Counterclaim Defendant,

and

Multimedia Patent Trust,Plaintiff/Counterclaim

Defendant,

v.

GATEWAY, INC., Gateway CountryStores LLC, Gateway Companies, Inc.,Cowabunga Enterprises, Inc., andGateway Manufacturing LLC, Defen-dants/Counterclaimants,

and

Dell Inc., Defendant/Counterclaimant,

and

Microsoft Corporation,Defendant/Counterclaimant–Appellant.

Nos. 2008–1485, 2008–1487, 2008–1495.

United States Court of Appeals,Federal Circuit.

Sept. 11, 2009.

Background: Patentee brought actionagainst competitors, alleging infringement

1302 580 FEDERAL REPORTER, 3d SERIES

of patent for method of entering informa-tion into fields on a computer screen with-out using a keyboard. The jury found pat-ent infringed by competitor’s softwareproducts and awarded damages of$357,693,056.18. The United States DistrictCourt for the Southern District of Califor-nia, Marilyn L. Huff, J., 580 F.Supp.2d1016, denied competitor’s motion for judg-ment as a matter of a law, and competitorappealed.

Holdings: The Court of Appeals, Michel,Chief Judge, held that:

(1) substantial evidence supported jury’sfinding that claim directed to methodof inputting data into particular fieldsdisplayed in computer form was notrendered obvious by earlier magazinearticle;

(2) substantial evidence supported jury’sfinding that claim which required dis-play of bit-mapped-graphics field intowhich user could enter information wasnot rendered obvious by article;

(3) adequate circumstantial evidence per-mitted jury to find that user of compet-itor’s products directly infringed pat-ent;

(4) sufficient evidence supported jury’sfinding of contributory infringement;

(5) substantial evidence supported jury’sfinding that competitor had requisiteintent to induce users of its products toinfringe patents; and

(6) damages award was not supported bysubstantial evidence.

Affirmed in part, vacated in part, and re-manded.

1. Federal Courts O765When reviewing the denial of a motion

for judgment as a matter of law (JMOL)after a jury verdict, the Court of Appealsapplies the same standard of review asthat applied by the trial court.

2. Courts O96(7)

The grant or denial of a motion forjudgment as a matter of law is a procedur-al issue not unique to patent law, reviewedunder the law of the regional circuit inwhich the appeal from the district courtwould usually lie.

3. Federal Civil Procedure O2608.1,2609

A district court grants judgment as amatter of law (JMOL) only if the evidence,construed in the light most favorable tothe nonmoving party, permits only onereasonable conclusion, and that conclusionis contrary to the jury’s verdict.

4. Federal Civil Procedure O2339

A district court may grant a new trialonly if the verdict is against the clearweight of the evidence.

5. Patents O324.55(5)

Infringement is a question of fact, re-viewed for substantial evidence when triedto a jury.

6. Patents O16(2, 3), 36.1(3, 4), 36.2(1),324.55(4)

Obviousness is a legal question re-viewed de novo by the Court of Appeals todetermine whether the subject matter ofthe claimed invention would have been ob-vious at the time the invention was madeto a person of ordinary skill in the art towhich the subject matter of the inventionpertains; underpinning that legal issue arefactual questions relating to the scope andcontent of the prior art, the differencesbetween the prior art and the claimedinvention, the level of ordinary skill in theart, and any relevant secondary consider-ations, such as commercial success, long-felt need, and the failure of others. 35U.S.C.A. § 103(a).


7. Federal Courts O813Court of Appeals reviews for an abuse

of discretion a district court’s decision con-cerning the methodology for calculatingdamages.

8. Federal Courts O871, 872Court of Appeals reviews the jury’s

determination of the amount of damages,an issue of fact, for substantial evidence; ajury’s decision with respect to damagesmust be upheld unless the amount isgrossly excessive or monstrous, clearly notsupported by the evidence, or based onlyon speculation or guesswork.

9. Patents O36(3)Substantial evidence supported jury’s

finding that claim directed to method ofinputting data into particular fields dis-played in computer form in patent formethod of entering information into fieldson computer screen without using key-board was not rendered obvious by earliermagazine article describing potential bene-fits and drawbacks of using computertouch screens; evidence included experttestimony that article did not disclose stepof inserting data into information field, didnot disclose limitations in claim for agraphical tool for composing informationor for a tool that overlayed a form, anddescribed system proceeding from entry ofone type of data to the next such thatordinarily skilled artisan would not havehad reason to highlight single data field, incontrast to limitation in claim for indicat-ing particular one of several informationfields into which information was to beinserted. 35 U.S.C.A. § 102(b, g).

10. Patents O36(3)Substantial evidence supported jury’s

finding that claim in patent for method ofentering information into fields on comput-er screen without using keyboard was notrendered obvious by earlier magazine arti-cle, which claim required display of bit-mapped-graphics field into which user

could enter information by writing ontouch sensitive screen using stylus; articledisclosed system that could accept touch ofpen or other device, not handwriting ontouch sensitive screen, and article in factappeared to teach away from inclusion offield into which user would enter informa-tion by writing on screen using stylus. 35U.S.C.A. § 102(b, g).

11. Patents O229To infringe a method claim, a person

must have practiced all steps of theclaimed method; just as anticipation can befound by a single prior art use, a finding ofinfringement can rest on as little as oneinstance of the claimed method being per-formed during the pertinent time period.35 U.S.C.A. § 271.

12. Patents O312(8)Adequate circumstantial evidence per-

mitted jury to find that at least one personother than patentee’s expert used competi-tor’s accused software products to performclaimed method of entering informationinto fields on computer screen without us-ing keyboard, and thereby directly infring-ed patent; evidence showed extensive salesof allegedly infringing products and com-petitor’s dissemination of manuals instruct-ing customers to use products in an in-fringing way. 35 U.S.C.A. § 271.

13. Patents O312(6)Competitor’s expert testimony that al-

legedly infringing software product did notcontain onscreen composition tool was in-sufficient to require jury to find as a factu-al matter only noninfringement of patentfor method of entering information intofields on computer screen without usingkeyboard; other expert testimony, includ-ing that of another of competitor’s experts,supported finding that product’s calendarfeature was composition tool that alloweduser to combine information as in claimedmethod. 35 U.S.C.A. § 271.


14. Patents O259(1)In order to succeed on a claim of

contributory infringement, in addition toproving an act of direct infringement,plaintiff must show that defendant knewthat the combination for which its compo-nents were especially made was both pat-ented and infringing and that defendant’scomponents have no substantial non-in-fringing uses. 35 U.S.C.A. § 271(c).

15. Patents O312(8)Sufficient evidence supported jury’s

finding that competitor intended users ofaccused software products to use products’date-picker tool and that the only intendeduse of the tool was infringing patent aswould render competitor liable for contrib-utory infringement of patent for method ofentering information into fields on comput-er screen without using keyboard; al-though products had many non-infringinguses, inclusion of infringing tool withinlarger programs with non-infringing usesdid not change the tool’s ability to infringe.35 U.S.C.A. § 271(c).

16. Patents O312(1.1)Patentee has the burden of showing

that an alleged infringer’s actions inducedinfringing acts and that he knew or shouldhave known his actions would induce actu-al infringements. 35 U.S.C.A. § 271(b).

17. Patents O259(1)A finding of inducement requires a

threshold finding of direct infringement:either a finding of specific instances ofdirect infringement or a finding that theaccused products necessarily infringe. 35U.S.C.A. § 271(b).

18. Patents O312(8)Inducement requires evidence of cul-

pable conduct, directed to encouraging an-other’s infringement, not merely that theinducer had knowledge of the direct in-fringer’s activities. 35 U.S.C.A. § 271(b).

19. Patents O312(8)

Intent element required for claim ofinducement to infringe a patent may beestablished through circumstantial evi-dence. 35 U.S.C.A. § 271(b).

20. Patents O312(8)

Evidence of active steps taken to in-duce infringement, such as advertising aninfringing use, can support a finding of anintention for the product to be used in aninfringing manner. 35 U.S.C.A. § 271(b).

21. Patents O312(8)

Substantial evidence supported jury’sfinding that competitor had requisite in-tent to induce users of its accused softwareproducts to infringe patent for method ofentering information into fields on comput-er screen without using keyboard; experttestimony explained that products’ formsand tools required users to performclaimed method of entering informationand that competitor’s documentation en-couraged users to use infringing tools. 35U.S.C.A. § 271(b).

22. Patents O312(1.7)

The burden of proving damages frominfringement falls on the patentee. 35U.S.C.A. § 284.

23. Patents O318(1), 319(1)

Two alternative categories of infringe-ment compensation are the patentee’s lostprofits and the reasonable royalty hewould have received through arms-lengthbargaining; a reasonable royalty is merelythe floor below which damages shall notfall. 35 U.S.C.A. § 284.

24. Patents O319(1)

The ‘‘analytical method’’ for calculat-ing reasonable royalties to be awarded asdamages for infringement focuses on the


infringer’s projections of profit for the in-fringing product. 35 U.S.C.A. § 284.

See publication Words and Phras-es for other judicial constructionsand definitions.

25. Patents O319(1)The ‘‘hypothetical negotiation’’ or the

‘‘willing licensor-willing licensee’’ approachfor calculating reasonable royalties to beawarded as damages for infringement, at-tempts to ascertain the royalty upon whichthe parties would have agreed had theysuccessfully negotiated an agreement justbefore infringement began. 35 U.S.C.A.§ 284.


26. Patents O319(1)The ‘‘hypothetical negotiation’’ ap-

proach tries to recreate the ex ante licens-ing negotiation scenario and to describethe resulting agreement to calculate rea-sonable royalties to be awarded as dam-ages for infringement; in other words, ifinfringement had not occurred, willing par-ties would have executed a license agree-ment specifying a certain royalty paymentscheme. 35 U.S.C.A. § 284.

27. Patents O319(1)The ‘‘hypothetical negotiation’’ for cal-

culating reasonable royalties to be award-ed as damages for infringement assumesthat the asserted patent claims are validand infringed. 35 U.S.C.A. § 284.

28. Patents O319(1)Consideration of rates paid by licen-

sees for the use of other patents compara-ble to patent in suit weighed stronglyagainst jury’s lump-sum royalty paymentof $357,693,056.18 as damages for indirectinfringement of patent for method of en-tering information into fields on computerscreen without using keyboard; no docu-mentary evidence or testimony showed theparties’ expectations as to usage of claimedmethod by customers using accused soft-

ware products that would support largesize of lump-sum award, lump-sum licenseagreements which purportedly supportedaward were either radically different fromhypothetical licensing agreement for thepatent in suit or lacking in probative valuedue to uncertain subject matter of agree-ments, and jury heard almost no testimonywith which to recalculate the value of pur-portedly comparable running royaltyagreements to arrive at lump-sum dam-ages award. 35 U.S.C.A. § 284.

29. Patents O319(1)Consideration of nature of patented

invention and portion of competitor’s profitthat could be credited to invention provid-ed minimal support for jury’s lump-sumroyalty payment of $357,693,056.18 asdamages for indirect infringement of pat-ent for method of entering information intofields on computer screen without usingkeyboard; customers’ infringing use of ac-cused software product’s date-picker fea-ture was a minor aspect of competitor’sproduct, and the portion of profit attribut-able to the infringing use of the date-picker tool was exceedingly small. 35U.S.C.A. § 284.

30. Patents O312(10), 319(1)Consideration of the extent to which

the infringer made use of the patentedinvention and evidence probative of thevalue of that use did not support jury’slump-sum royalty payment of$357,693,056.18 as damages for indirect in-fringement of patent for method of enter-ing information into fields on computerscreen without using keyboard; beyond cir-cumstantial evidence that at least one per-son using competitor’s accused softwareproduct performed the patented methodone time in the United States sometimeduring the relevant period, there was noth-ing indicating that anyone had ever per-formed the patented method or how manytimes. 35 U.S.C.A. § 284.


31. Patents O319(1)Consideration of evidence of usage of

claimed method after infringement startedcan, under appropriate circumstances, behelpful in assessing whether a royalty isreasonable award of damages for infringe-ment; usage or similar data may provideinformation that the parties would fre-quently have estimated during hypotheti-cal negotiation for licensing of patent. 35U.S.C.A. § 284.

32. Patents O319(1)Consideration of nature of hypotheti-

cal license as exclusive or nonexclusive, ofthe licensor’s established policy and mar-keting program to maintain patent monop-oly, of the commercial relationship be-tween the licensor and the licensee, of theestablished profitability of the productmade under the patent, of the utility andadvantages of the patent property over oldmodes or devices, and of the portion of theprofit or of the selling price that would becustomary to allow for the use of the in-vention weighed neither for nor againstjury’s lump-sum royalty payment of$357,693,056.18 as damages for indirect in-fringement of patent for method of enter-ing information into fields on computerscreen without using keyboard based oncustomers’ use of competitor’s accusedsoftware product; factors offset one anoth-er to the extent they were relevant.

33. Patents O312(10)Jury’s damages award of lump-sum

royalty payment of $357,693,056.18 for in-direct infringement of patent for method ofentering information into fields on comput-er screen without using keyboard based oncustomers’ use of competitor’s accusedsoftware product was not supported bysubstantial evidence; there was no evi-dence that patentee and competitor wouldhave entered into hypothetical licensingagreement calling for lump-sum royaltypayment subsequently amounting to ap-proximately eight percent of competitor’s

revenues for the sale of accused product.35 U.S.C.A. § 284.

34. Patents O323.3

On post-trial motion for judgment as amatter of law challenging jury’s award ofroyalties as damages in patent infringe-ment action, district court must scrutinizethe evidence carefully to ensure that thesubstantial evidence standard is satisfied,while keeping in mind that a reasonableroyalty analysis necessarily involves an el-ement of approximation and uncertainty.35 U.S.C.A. § 284.

35. Patents O312(10)

To the extent that jury relied on anentire market value calculation to arrive atlump-sum royalty payment amount of$357,693,056.18 as damages for infringe-ment, damages award was against theclear weight of the evidence in action forindirect infringement of patent for methodof entering information into fields on com-puter screen without using keyboard basedon customers’ use of competitor’s accusedsoftware product; there was no evidencethat claimed method was the basis, or evena substantial basis, of consumer demandfor accused product, and patentee’s expert,after being precluded from using price ofentire computer loaded with accused soft-ware as the royalty base, used the price ofthe accused software as the base but im-properly inflated the royalty rate to eightpercent to try to reach the damages num-ber he would have obtained using the priceof entire computer, despite admitting thatcompetitor had never agreed to pay aneight percent royalty on any comparablepatent. 35 U.S.C.A. § 284.

36. Patents O318(4.1)

For the ‘‘entire market value’’ rule toapply as the measure of damages for pat-ent infringement, the patentee must provethat the patent-related feature is the basis


for customer demand of the accused prod-uct. 35 U.S.C.A. § 284.


37. Patents O319(1)The base used in a running royalty

calculation to determine infringementdamages can always be the value of theentire commercial embodiment, as long asthe magnitude of the royalty rate is withinan acceptable range; thus, even when thepatented invention is a small component ofa much larger accused commercial prod-uct, awarding a reasonable royalty basedon either sale price or number of units soldcan be economically justified. 35 U.S.C.A.§ 284.

38. Patents O323.2(4)Evidence submitted by patentee at

summary judgment stage showing that ac-cused products reached the same result asapparatus claims containing means-plus-function elements in patent for method ofentering information into fields on comput-er screen without using keyboard was in-sufficient to raise triable issue of fact as towhether products infringed claims; evi-dence did not demonstrate circumstantiallyor otherwise anything about the steps usedby the accused products to arrive at theresult. 35 U.S.C.A. § 271; Fed.Rules Civ.Proc.Rule 56, 28 U.S.C.A.

Patents O328(2)4,383,272, 4,439,759, 4,958,226, 5,347,-

295. Cited.

Patents O328(2)4,763,356. Valid and Infringed.

John M. Desmarais, Kirkland & Ellis,LLP, of New York, NY, argued for plain-tiff/counterclaim defendant-cross appellantLucent Technologies, Inc. With him on the

brief were Paul A. Bondor and Michael P.Stadnick.

Constantine L. Trela, Jr., Sidley AustinLLP, of Chicago, IL, argued for defen-dant/counterclaimant-appellant MicrosoftCorporation. With him on the brief wereRobert N. Hochman and Tacy F. Flint,and Carter G. Phillips, of Washington, DC.Of counsel on the brief were John E. Gart-man and John W. Thornburgh, Fish &Richardson, P.C., of San Diego, CA. Ofcounsel were Juanita Rose Brooks and Jo-seph P. Reid, Fish & Richardson, P.C. ofSan Diego, CA; and Thomas Andrew Cul-bert and Stephen P. McGrath, MicrosoftCorporation, of Redmond, WA.

Edward R. Reines, Weil, Gotshal &Manges LLP, of Redwood Shores, CA, foramici curiae Apple Inc., et al. With himon the brief was Sonal N. Mehta.

James W. Dabney, Fried, Frank, Harris,Shriver & Jacobson LLP, of New York,NY, for amici curiae Bank of AmericaCorporation, et al.

Donald R. Dunner, Finnegan,Henderson, Farabow, Garrett & Dunner,L.L.P., of Washington, DC, for amici curi-ae 3M Company, et al. With him on thebrief were Don O. Burley and Erik R.Puknys, of Palo Alto, CA. Of counsel onthe brief were Hansjorg Sauer, Biotechnol-ogy Industry Organization, of Washington,DC; Michael J. Biber, Dolby Laboratories,Inc., of San Francisco, CA; P. MichaelWalker and Barry Estrin, E.I. DuPont deNemours and Co., of Wilmington, DE;Richard F. Phillips, Exxon Mobil ChemicalCompany, of Houston, TX; Buckmaster deWolf, General Electric Company, of Fair-field, CT; Philip S. Johnson, Johnson &Johnson, of New Brunswick, NJ; StevenW. Miller, The Procter & Gamble Compa-ny, of Cincinnati, OH; Alexander H. Rog-ers, Qualcomm Inc., of San Diego, CA;and Taraneh Maghame, Tessera, Inc., ofSan Jose, CA.


Before MICHEL, Chief Judge,NEWMAN and LOURIE, Circuit Judges.

MICHEL, Chief Judge.

Microsoft Corporation appeals the denialof post-trial motions concerning a jury ver-dict that U.S. Patent No. 4,763,356 (the‘‘Day patent’’) was not invalid and thatMicrosoft indirectly infringed the Day pat-ent. Microsoft also appeals the$357,693,056.18 jury award to LucentTechnologies, Inc. for Microsoft’s infringe-ment of the Day patent. Because thevalidity and infringement decisions werenot contrary to law and supported by sub-stantial evidence, we affirm. Because thedamages calculation lacked sufficient evi-dentiary support, we vacate and remandthat portion of the case to the districtcourt for further proceedings.

BACKGROUND

In the 1970s, niche groups of hobbyists,including two teenagers in a Los Altosgarage, built personal computers fromscratch. In the early to mid–1980s, per-sonal computing gained popularity al-though still in its infancy. In 1982, afifteen-year-old high school student creat-ed the first public computer virus, spread-ing it among personal computers via flop-py disks, most likely the 51/4-inch version,as the 31/2-inch disk wasn’t introduced untila few years later. Commercially availableoperating systems at the time were mainlytext-based with few, if any, graphical inter-faces. In 1984, with its now famous‘‘1984’’ commercial aired during SuperBowl XVIII on Black Sunday, Apple Com-puter announced the introduction of itsApple Macintosh, the first widely sold per-sonal computer employing a graphical userinterface. The following year, Microsoftintroduced its own version of a graphicaloperating system, Windows 1.0.

In December 1986, three computer engi-neers at AT & T filed a patent application,which eventually issued as the Day patent.The patent is generally directed to a meth-od of entering information into fields on acomputer screen without using a keyboard.A user fills in the displayed fields bychoosing concurrently displayed, prede-fined tools adapted to facilitate the input-ting of the information in a particular field,wherein the predefined tools include an on-screen graphical keyboard, a menu, and acalculator. The system may display men-us of information for filling in a particularfield and may also be adapted to communi-cate with a host computer to obtain theinformation that is inserted into the fields.In addition, one of the displayed fields canbe a bit-mapped graphics field, which theuser fills in by writing on the touch screenusing a stylus.

In 2002, Lucent 1 initiated the presentaction against Gateway, and Microsoft sub-sequently intervened. The appeal comesfrom the consolidated action of three sepa-rate infringement suits filed in the EasternDistrict of Virginia, the District of Dela-ware, and the Southern District of Califor-nia. The consolidated action was original-ly before Senior Judge Rudi Brewster. InOctober 2007, Judge Brewster severedpart of the patent infringement case fortransfer to Judge Marilyn Huff. The courtsevered and transferred for further pro-ceedings all matters relating to the Daypatent and U.S. Patent Nos. 4,383,272;4,958,226; 5,347,295; and 4,439,759.

At trial, Lucent charged infringement byMicrosoft of claims 19 and 21, among oth-ers, of the Day patent. Lucent allegedindirect infringement of claim 19 based onthe sales and use of Microsoft Money,Microsoft Outlook, and Windows Mobile.As to claim 21, Lucent asserted that theuse of Windows Mobile infringed. Lucent

1. The Day patent is now assigned to Lucent.


also alleged infringement by Dell and as-serted claims of the other patents as well,but those issues are not on appeal.2 Mi-crosoft challenged Lucent’s infringementcontentions, contending among other de-fenses that the Day patent was invalid forbeing anticipated or obvious and, even ifvalid, Microsoft’s sales of its products didnot infringe the Day patent.

The jury found Microsoft liable on claim19 as to all three products and on claim 21as to Windows Mobile but returned a find-ing of no infringement by Dell as to thosetwo claims. The verdict, without distin-guishing among the three products or be-tween inducement and contributory in-fringement, awarded a single lump-sumagainst Microsoft for all products involved.The jury awarded $357,693,056.18 for Mi-crosoft’s infringement of the Day patent,excluding prejudgment interest.3

The parties filed numerous post-trialmotions, including Microsoft’s renewedmotions seeking judgment as a matter oflaw that the Day patent was anticipatedand obvious and motions challenging thejury’s finding of infringement and thejury’s award of damages. In particular,Microsoft sought judgment as a matter oflaw that claims 19 and 21 were anticipatedunder 35 U.S.C. § 102(b) and (g) or wereobvious under § 103. The district courtfound substantial evidence in the record tosupport the jury’s determination that thedefendants had not proven the Day patentto be invalid. The district court also heldthat neither judgment as a matter of lawnor a new trial was appropriate on thejury’s finding that Lucent had provendamages in the amount of approximately$358 million. The district court grantedonly the post-trial motion setting aside theobviousness verdict concerning U.S. Patent

No. 4,958,226 but denied all other post-trial motions, including those for the Daypatent. See Lucent Techs., Inc. v. Gate-way, Inc., 580 F.Supp.2d 1016 (S.D.Cal.2008). Microsoft has timely appealed thedistrict court’s decision. We have jurisdic-tion pursuant to 28 U.S.C. § 1295(a)(1).

ANALYSIS

I. Standards of Review

[1–4] When reviewing the denial of amotion for judgment as a matter of law(‘‘JMOL’’) after a jury verdict, we‘‘ ‘appl[y] the same standard of review asthat applied by the trial court.’ ’’ Wechslerv. Macke Int’l Trade, Inc., 486 F.3d 1286,1290 (Fed.Cir.2007) (quoting nCube Corp.v. SeaChange Int’l, Inc., 436 F.3d 1317,1319 (Fed.Cir.2006)). Furthermore, ‘‘[t]hegrant or denial of a motion for judgmentas a matter of law is a procedural issue notunique to patent law, reviewed under thelaw of the regional circuit in which theappeal from the district court would usual-ly lie.’’ Summit Tech., Inc. v. Nidek Co.,363 F.3d 1219, 1223 (Fed.Cir.2004). In theNinth Circuit, a district court grantsJMOL only ‘‘if the evidence, construed inthe light most favorable to the nonmovingparty, permits only one reasonable conclu-sion, and that conclusion is contrary to thejury’s verdict.’’ Pavao v. Pagay, 307 F.3d915, 918 (9th Cir.2002). Similarly, a dis-trict court in the Ninth Circuit ‘‘may granta new trial only if the verdict is against theclear weight of the evidence.’’ Id.

[5, 6] ‘‘Infringement is a question offact, reviewed for substantial evidencewhen tried to a jury.’’ Finisar Corp. v.DirecTV Group, Inc., 523 F.3d 1323, 1332(Fed.Cir.), cert. denied, ––– U.S. ––––, 129

2. Additionally, on December 15, 2008, Micro-soft and Lucent filed a stipulation dismissingall claims between them except those relatingto the Day patent.

3. For U.S. Patent No. 5,347,295, the juryawarded $10,350,000.00 for Microsoft’s in-fringement and $51,000.00 for Dell’s infringe-ment.


S.Ct. 754, 172 L.Ed.2d 727 (2008). Obvi-ousness is a legal question reviewed denovo. PharmaStem Therapeutics, Inc. v.ViaCell, Inc., 491 F.3d 1342, 1359 (Fed.Cir.2007), cert. denied, ––– U.S. ––––, 128S.Ct. 1655, 170 L.Ed.2d 355 (2008). Thestatutory standard requires us to decidewhether the subject matter of the claimedinvention ‘‘would have been obvious at thetime the invention was made to a person ofordinary skill in the art to which [thesubject matter of the invention] pertains.’’35 U.S.C. § 103(a) (2006); see also KSRInt’l Co. v. Teleflex Inc., 550 U.S. 398, 415–16, 127 S.Ct. 1727, 167 L.Ed.2d 705 (2007).‘‘Underpinning that legal issue are factualquestions relating to the scope and contentof the prior art, the differences betweenthe prior art and the claimed invention, thelevel of ordinary skill in the art, and anyrelevant secondary considerations, such ascommercial success, long-felt need, and thefailure of others.’’ PharmaStem, 491 F.3dat 1359.

[7, 8] We review for an abuse of discre-tion a district court’s decision concerningthe methodology for calculating damages.Unisplay, S.A. v. Am. Elec. Sign Co., 69F.3d 512, 517 n. 8 (Fed.Cir.1995); see alsoState Indus., Inc. v. Mor–Flo Indus., Inc.,883 F.2d 1573, 1576–77 (Fed.Cir.1989)(noting that the precise methodology usedin ‘‘assessing and computing damages iscommitted to the sound discretion of thedistrict court’’). We review the jury’s de-termination of the amount of damages, anissue of fact, for substantial evidence.SmithKline Diagnostics, Inc. v. HelenaLabs. Corp., 926 F.2d 1161, 1164 n. 2 (Fed.Cir.1991). ‘‘A jury’s decision with respectto an award of damages ‘must be upheldunless the amount is grossly excessive ormonstrous, clearly not supported by theevidence, or based only on speculation orguesswork.’ ’’ State Contracting & Eng’gCorp. v. Condotte Am., Inc., 346 F.3d 1057,1072 (Fed.Cir.2003) (quoting Brooktree

Corp. v. Advanced Micro Devices, Inc., 977F.2d 1555, 1580 (Fed.Cir.1992)).

II. Invalidity

Before the jury, Microsoft engaged in amulti-pronged attack of the Day patent’svalidity. Microsoft argued, for example,that the Day patent was anticipated under§ 102(b) and (g) and obvious under § 103.On appeal, Microsoft challenges only thedistrict court’s denial of the JMOL motionon obviousness. Microsoft does not chal-lenge any of the district court’s claim con-structions. In analyzing the obviousnessdefense, we therefore must apply the claimconstruction as it was presented to thejury. Further, Microsoft relies on only asingle prior art document for its obvious-ness position with respect to claim 19.

Independent claim 19 is directed to amethod of inputting data using certain pre-defined ‘‘tools’’ and entering that informa-tion into particular fields displayed in acomputer form. Claim 21 depends fromclaim 19 and further specifies that theinformation field is displayed as ‘‘a bit-mapped-graphics field.’’ Claims 19 and 21read in full as follows.

19. A method for use in a computerhaving a display comprising the steps of

displaying on said display a plurality ofinformation fields,

identifying for each field a kind of infor-mation to be inserted therein,

indicating a particular one of said infor-mation fields into which information is tobe inserted and for concurrently display-ing a predefined tool associated withsaid one of said fields, said predefinedtool being operable to supply informa-tion of the kind identified for said onefield, said tool being selected from agroup of predefined tools including atool adapted to supply an individual en-try from a menu of alternatives and at


least a tool adapted to allow said user tocompose said information, and

inserting in said one field informationthat is derived as a result of said useroperating said displayed tool.

* * *

21. The method set forth in claim 19wherein the step of displaying said pat-

tern includes the step of displaying oneor more of said information fields as abit-mapped-graphics field.

The 8356 patent, col.17 l.27 to col.18 l.22.Figure 5 of the Day patent, shown below,illustrates an embodiment of the inventionin which a graphical calculator overlays theform having multiple fields, one of which—‘‘Quantity’’ (Qty 61)—is highlighted.

A. Claim 19

[9] Microsoft’s position was that claim19 would have been obvious over a 1984magazine article, Michael Tyler, TouchScreens: Big Deal or No Deal?, Datama-tion, Jan. 1984, at 146 (‘‘the Datamationarticle’’ or ‘‘Datamation’’). The articledescribes both the potential benefits anddrawbacks of using computer touchscreens at a time when computer tech-nology was developing. As Datamationreports, analysts feared that ‘‘[t]he com-

bination of these drawbacks and outsideinfluences may doom the touch-sensitiveterminal’’ and that ‘‘[e]ven touch technol-ogy’s greatest proponents admit that thefuture is not as bright as it onceseemed.’’ Id. at 154. The Datamationarticle’s ultimate message was that‘‘[t]ouch-sensitive terminals may be verysexy in the office, but whether they actu-ally stimulate people to use computers isopen to doubt.’’ Id. at 146.

Much of the trial testimony, as relatingto the FXFE system 4 in the Datamation

4. In the Datamation article, the relevant com-puter system is referred to as Easel.Throughout trial and in the briefs, the systemwas called ‘‘FXFE,’’ although that name is

based on information outside the article’scontent. For ease of reference only, we usethe FXFE terminology.


article, described not what was in the arti-cle but what was allegedly prior art forpurposes of prior public use or prior inven-tion. The Datamation article’s entire dis-closure relied upon by Microsoft on appealis much more limited, namely one photo-graph 5 and the following two short para-graphs.

The bank is in the process of imple-menting a two-phase strategy that itfeels will accomplish the breakout [tech-nology]. The plan employs Easelworkstations programmed in the bank’sLondon office. Each workstation’sscreen is divided roughly in half vertical-ly. Large touch-sensitive boxes at thetop of the screen invite the user to de-clare the current transaction a ‘‘buy’’ ora ‘‘sell’’; at the bottom, similar boxes letthe users deal, service, cancel, log out,or lock out their screens. The right halfof the screen lists key information aboutthe current transaction, including buyerbank, seller bank, currency, exchangerate (in dollars and the foreign curren-cy), broker, bank customer, exchangelocation, and method of payment.

When the trader touches the screen inone of these areas, a list of potentiallyvalid entries or a numeric keypad ap-pears on the left half, inviting the userto choose the information needed on theright. For instance, when the user hitsthe ‘‘broker’’ cell on the right, a list ofbrokers appears on the left; the traderthen hits the name of the broker to beinvolved in the current trade, and theinformation is entered into the system.For exchange rates and other numericaldata, the user hits the proper cell on theright and then types in the numeric dataon the keypad that appears on the left.In this way, an entire transaction can becompleted directly on the workstation.(A QWERTY layout can be called up on

the left for entry of nonstandard or rarenames—an infrequently traded curren-cy, for example.)

Datamation, supra, at 148.

During trial, the opposing experts forMicrosoft and Lucent expressed conflictingviews about the Datamation article’s dis-closure. Specifically, the parties and theirexperts disagreed about whether the Data-mation article described three of the limi-tations of claim 19 and whether a fourthlimitation would have been obvious fromthe article. We address each limitation inturn.

First, the experts expressed differingopinions about whether the Datamation ar-ticle disclosed the limitation of ‘‘insertingin said one field information that is derivedas a result of said user operating saiddisplayed tool.’’ The district court con-strued this term to mean ‘‘inserting in aparticular field information that is derivedas a result of the user operating the dis-played tool.’’ Lucent argues that all theDatamation article states is that the infor-mation is entered ‘‘into the system.’’ Mi-crosoft counters that ‘‘[t]he article de-scribes how an FXFE user entered (or‘inserted’) information into what it calls‘cells,’ another name for ‘informationfields.’ ’’ But Microsoft’s expert was lessthan direct when asked whether the Data-mation disclosed an information field, asrequired by claim 19:

Q: And you told us the article had in-formation fields in it, right?A: The article refers to fields as cells,and I think people understand a cell tobe a field.Q: The article doesn’t use the word‘‘information fields,’’ does it?A: I recall it using fields—using cellsto represent fields, and I think what it

5. The district court observed that the photo-graph in the Datamation article was ‘‘of limit-

ed clarity’’ and ‘‘limited in detail.’’ 580F.Supp.2d at 1032.


was describing was a field. Whether itactually used the word ‘‘field,’’ I don’tknow. I’d have to look at the article tosee if it—Q: The article talked about a brokercell. It didn’t say that the informationin the broker cell goes into a field, didit? You know it didn’t use that term,right?A: I don’t know that, but I—you wouldunderstand a cell to be a field. It wasvery clear from the article.Q: I know that you want to say that.What I’m asking you is what is actuallyin the article. You know as you sit heretoday that that article does not use theterm ‘‘information field’’ in those words,true or false?A: I can’t answer that because I wouldhave to look at it to see if it used field,but when I read that article, it was clearto me what they were discussing was afield, and what’s demonstrated there is afield. Whether they used only cell andnot field I’d have to actually look at thearticle.Q: So can we agree that as you sit heretoday in the stand you don’t know?A: Well, I’ve read the article, but Ihaven’t done an analysis on whether theword ‘‘field’’ actually shows up intothat—in that article.

J.A. 08112–13.Microsoft’s expert seemed to equate the

‘‘information field’’ of claim 19 with theterm ‘‘cell,’’ as used in the Datamationarticle. What the article describes as a‘‘cell,’’ however, appears to be differentfrom an ‘‘information field,’’ as used in theclaim of the Day patent. The articlestates that ‘‘when the user hits the ‘broker’cell on the right, a list of brokers appearson the left.’’ Datamation, supra, at 148.In the next stage of the transaction, theuser could select from the ‘‘list of brokersappear[ing] on the left’’ and ‘‘the traderhits the name of the broker.’’ Id. This

sequence could be viewed as occurringwithout inserting an entry into an informa-tion field. Also, a reasonable jury couldhave understood ‘‘cell’’ to mean an area onthe screen that a user touches to proceedto the next stage in the transaction and notan on-screen box in which entered data isdisplayed, i.e., an information field. TheDay patent requires an information field.

It’s entirely possible—and reasonable—for the jury to have concluded that theDatamation article describes a computersystem operating as a data input systemwithout the creation of on-screen formshaving information fields, as required byclaim 19. The photograph shows nothingabout whether data is entered into a fieldand thus displayed on the screen. Thephotograph does not depict anything re-sembling an ‘‘information field.’’ A rea-sonable jury could have concluded that theFXFE system’s process consisted of a userentering data, the system receiving thatdata, and the system then proceeding tothe next operation in the process, withoutdisplaying the data in an information fieldon the screen. For instance, consider asequence routinely employed by an auto-mated teller machine (ATM). When with-drawing money from one’s checking ac-count (e.g., $50, $100, or $200), a userpresses the appropriate on-screen button,the ATM system receives the input, andthen the system proceeds to the next deci-sional operation (e.g., print receipt?). Inthis sequence, the system never enters anddisplays the user’s selection into a field onthe computer screen.

Although the Datamation article possi-bly describes a system capable of insertingdata into an information field, the articleitself does not appear to teach that step.Of singular importance here, however, isthat the jury could have reasonably viewedthe Datamation article as not disclosingthe ‘‘inserting’’ step.


The second limitation in dispute is the‘‘tool’’ limitation. Claim 19 requires a ‘‘tooladapted to allow said user to compose saidinformation.’’ The district court interpret-ed this limitation to mean ‘‘a graphicalkeyboard tool or a graphical number key-pad tool, which allows the user to composeinformation by pointing to the display keysof that tool.’’

Microsoft again contends that the Data-mation article necessarily discloses this‘‘tool’’ limitation. Reasoning that the key-board in the Datamation photograph isgraphical because it is a ‘‘pictorial’’ imageon the screen, Microsoft relies on testimo-ny from an expert, who told the jury, ‘‘Sowhen you’re talking about somethinggraphical, you’re talking about a pictorialrepresentation that’s displayed on the com-puter screen.’’ This testimony, Microsoftasserts, is evidence sufficient to overturnthe jury’s verdict.

The jury also heard a different viewfrom Lucent’s expert, who explained thedifference between a computer’s ‘‘textmode’’ and ‘‘graphics mode.’’ Lucent’s ex-pert opined that ‘‘[t]here’s no evidence thatthe FXFE system was anything other thana text-based system.’’ He further testifiedas followed:

Q: Now, you told us this system is nota graphical system. What did you meanby that?A: This is—this program was writtenin text mode. Graphics mode on com-puters of this era was too slow to sup-port productivity applications, which iswhat this is. So developers uniformly—I mean, there may have been a rareexception, but with the exception of peo-ple who needed to work in graphics suchas allowing people to draw, these pro-grams were built in text mode.And what text mode means is that theonly control a programmer has is to sayI want the letter A, I want the numberzero, I want an exclamation point, I

want an underscore and so forth. Andeven the microprocessor doesn’t havecontrol. There’s a piece of hardware outthere that’s just putting characters on ascreen.So it’s text mode, it’s not graphics mode.The 356[Day] patent is all about graph-ics mode.Q: In fact, the Court’s construction forthe composition tool says it has to be agraphical keypad tool.A: That’s correct.Q: And this isn’t even a graphical sys-tem.A: No, it’s not.

J.A. 08658–59.

Microsoft’s own expert seemingly admit-ted that the Datamation article did notnecessarily disclose a system operating ingraphics mode:

Q: And the article doesn’t tell us thatthis system operated in graphics modeas we understand that term to meanwhere you’re addressing information toindividual pixels, right? The articledoesn’t say that?A: Well, the article does describe thatit had a very high resolution, 976 pixelsby some other resolution, which indi-cates to me that it operated in—it couldoperate in a graphics mode.Q: I’m not asking you if it could. Thearticle does not use the phrase ‘‘graphicsmode,’’ does it?A: I don’t think the article describeswhether it worked in graphics mode ornot.

J.A. 08112. Based on this evidence, thejury was within its charge to conclude thatthe Datamation article did not disclose ‘‘agraphical keyboard tool or a graphicalnumber keypad tool.’’

The third disputed limitation is ‘‘concur-rently displaying a predefined tool associ-ated with said one of said fields.’’ The


district court’s construction requires thisphrase to mean ‘‘displaying at the sametime, as by a window overlaying the form.’’Microsoft contends that ‘‘[t]he Datamationarticle leaves no doubt that the FXFEsystem’s graphical tools are displayed atthe same time as the information fields.’’Lucent responds that Microsoft is imper-missibly trying to broaden the scope of theclaim by eliminating a requirement thatthe window overlays the form.

As noted above, Microsoft did not objectto the claim construction read to the jury,and does not appeal the claim constructionto us. Based on the claim constructionpresented, the jury reasonably could haveconcluded that the Datamation article doesnot disclose a graphical tool that overlayedthe form. Microsoft’s expert concededthat the Datamation article doesn’t de-scribe a tool that overlays a form.

Q: The article does not discuss toolsoverlaying a form, true?A: I don’t think it describes it thatway, no. Right.Q: In fact, the keyboard does not over-lay the form in the—in the article. Itwould have been wrong if it described itthat way, right?A: Yes, the—as I told you on my di-rect, the tools were on the left side ofthe screen.

J.A. 08112. From this testimony and thephotograph ‘‘of limited clarity’’ in the Da-tamation article, the jury was permitted toconclude, as a factual matter, that the arti-cle did not disclose this limitation. Micro-soft offers nothing to fill this gap in itsobviousness analysis.

Instead, Microsoft argues to us that thejury applied the wrong claim constructionrequiring an overlayed tool. Microsoft as-serts that the claim construction given bythe district court mandates only the con-current, or simultaneous, display of the‘‘predefined tool’’ and the ‘‘one of saidfields.’’ This argument is unpersuasive,

however. First, reading the claim con-struction as Microsoft does would rendersuperfluous the phrase ‘‘as by a windowoverlaying the form.’’ If the proper claimapplication were as Microsoft argues it tobe, the ‘‘as by’’ phrase is completely unnec-essary. Second, as noted, Microsoft doesnot challenge the claim construction. IfMicrosoft believed that the proper claimconstruction does not require the tool tooverlay the form, Microsoft should haveargued for such a claim construction in-stead of disputing the jury’s reasonableapplication of the claim construction asgiven to the jury.

The fourth limitation in dispute is the‘‘indicating’’ step. Unlike the previousthree claim limitations, the parties agreethat the Datamation article does not ex-plicitly disclose the limitation of ‘‘indicatinga particular one of said information fieldsinto which information is to be inserted.’’Microsoft’s expert conceded that the Data-mation article doesn’t teach this limitation.

Moreover, both parties agree that ‘‘indi-cating’’ includes highlighting the informa-tion field or placing a cursor in the infor-mation field so the user knows which field‘‘into which information is to be inserted.’’According to Microsoft, ‘‘failing to indicatewhich field information is being enteredinto—that is, having information show uprandomly somewhere on the screen—would be contrary to all experience andcommon sense.’’ We disagree. In manyinstances perhaps, it may make sense tohighlight a field into which information isentered. But, when examined in the con-text of the Datamation article’s descrip-tion, we understand how the jury couldconclude otherwise.

As noted above, the Datamation articledoesn’t explicitly describe the entering ofinformation into onscreen fields. Assum-ing the article did, it does not necessarilylead one of skill in the art to have a reason


to ‘‘indicate’’ the field into which informa-tion is entered. The jury could have rea-sonably viewed the Datamation system asdisplaying only one onscreen informationfield. Nothing in the article appears tosuggest that the FXFE system displays—or is capable of displaying—multiple infor-mation fields at the same time. To thecontrary, the system is described as pro-ceeding from the entry of one type of datato the next. See Datamation, supra, at148. Having agreed with this description,the jury could have also concluded that anordinarily skilled artisan would not havehad a reason to ‘‘indicate’’ the only field onthe computer screen. If there is only onefield displayed on the screen, the userknows that any data will be entered intothat single field. Specifying the only fieldby highlighting would not have helped theuser in any way, or at least a jury couldhave so concluded, based on the evidenceadduced at trial.

Having examined the four contestedclaim limitations, the jury would have beenwithin its reasonable boundaries in findingthe Datamation article to be lacking atleast one of the limitations and in conclud-ing that no sufficient reason existed tomodify the prior art. When the underly-ing facts are taken in the light most favor-able to Lucent, the non-moving party, theevidence reasonably permitted the jury tohave decided that Microsoft did not proveby clear and convincing evidence thatclaim 19 would have been obvious. Ac-cordingly, the district court did not errwhen it denied Microsoft’s motion forjudgment as a matter of law concerningthe validity of claim 19.

B. Claim 21

[10] Microsoft’s invalidity position forclaim 21 fares no better. Claim 21 re-quires that ‘‘the step of displaying saidpattern includes the step of displaying oneor more of said information fields as a bit-mapped-graphics field.’’ The district court

construed ‘‘bit-mapped graphics field’’ torefer to ‘‘a field into which a user is toenter information by writing on a touchsensitive screen using a stylus.’’

Microsoft argues that claim 21 wouldhave been obvious in light of Datamationalone, contending that the article ‘‘de-scribes FXFE’s touch sensitive screen asable to ‘accept a finger, a pen, or any otherdevice.’ ’’ The Datamation article, underMicrosoft’s reading, ‘‘inherently disclos[es]the ability to enter information by writingon the screen with a stylus.’’ What Micro-soft misapprehends is that the disclosedFXFE system can accept the touch of apen or any other device. The Datamationarticle does not teach a computer systemthat can accept ‘‘information by writing ona touch sensitive screen using a stylus.’’

Microsoft also asserts that claim 21would have been obvious over Datamationin view of other prior art teaching theprocess of capturing on-screen handwrit-ing. This argument is not sufficient tooverturn the jury’s verdict. Nothing inthe Datamation article itself discloses areason why on-screen handwriting, e.g., bywriting with a stylus, could or should beused with the FXFE system. Rather,much of the Datamation article appears toteach away from the inclusion of ‘‘a fieldinto which a user is to enter informationby writing on a touch sensitive screen us-ing a stylus.’’ The Datamation articlequotes the Chemical Bank executive re-sponsible for implementing the FXFE sys-tem as describing deficiencies with elec-tronic pens: ‘‘We tried electronic pens,tablets, voice input, you name it. But thetablets demand too much precision on thepart of the traderTTTT’’ Datamation, supra,at 148.

The article also details the need for fastand efficient entry of trades, describingtraders who ‘‘handle 1,000 trades a day,and often deal so quickly that they cannot


write down all their trades on separateslips of paper.’’ Id. at 146. From thisdescription, it’s understandable how thejury could have concluded that a skilledartisan would not have had a reason tocombine the Easel system with a slowermeans of inputting information such as‘‘writing on a touch sensitive screen usinga stylus.’’ For these reasons, the districtcourt did not err in denying Microsoft’smotion for JMOL that claim 21 would havebeen obvious.

III. Infringement

The jury found indirect infringement byMicrosoft. Claims 19 and 21 are methodclaims; thus, Microsoft’s sales of its soft-ware alone cannot infringe the patent.Infringement occurs only when someoneperforms the method using a computerrunning the necessary software. Thus,Microsoft can only be liable for infringe-ment of claims 19 and 21 as a contributorand/or an inducer.

Microsoft makes the following argu-ments concerning indirect infringement.First, Lucent didn’t prove direct infringe-ment, a necessary predicate for provingindirect infringement. Second, Lucentdidn’t prove contributory infringement be-cause the products have substantial nonin-fringing uses. Third, Lucent can’t proveinducement because the products aremerely capable of inducing and Microsoftwasn’t shown to have the requisite intentto induce. We address each argument inturn.

A. Direct Infringement

[11] To infringe a method claim, a per-son must have practiced all steps of theclaimed method. See Joy Techs., Inc. v.Flakt, Inc., 6 F.3d 770, 775 (Fed.Cir.1993)(‘‘A method claim is directly infringed onlyby one practicing the patented method.’’);see also 35 U.S.C. § 271 (2006). Just asanticipation can be found by a single priorart use, a finding of infringement can rest

on as little as one instance of the claimedmethod being performed during the perti-nent time period.

[12] Lucent asserts that certain fea-tures of Outlook, Money, and WindowsMobile, when used, practice the methodsof claims 19 and 21. For instance, Outlookincludes a calendar tool that allows theuser to enter dates in a form when prepar-ing a record of an appointment. The tooldisplays a monthly calendar as a grid ofnumbered dates, along with graphical con-trols that allow the user to scroll to adja-cent months or skip directly to a differentmonth and year. Once the user defines adate with the tool, the software enters thenumerical day, month, and year into thecorresponding field in the appointmentform. Similar to the number pad toolillustrated in the Day patent, Outlook’scalendar date-picker tool enables the userto select a series of numbers, correspond-ing to the day, month, and year, usinggraphical controls. This date-picker calen-dar tool is incorporated in a few of Out-look’s features. Microsoft Money andWindows Mobile have similar functionali-ties.

According to Microsoft, Lucent failed tointroduce any evidence that any customeractually used the claimed method in any ofthe Microsoft products. Noting that ‘‘eachaccused product has numerous uses thatdo not involve forms with onscreen compo-sition tools’’ and that ‘‘the specific narrowfunction of the patented method—filling ina form—can be performed without usingthe asserted ‘composition tool’ features,’’Microsoft urges that ‘‘infringement is notinevitable.’’ The only evidence of directinfringement, in Microsoft’s view, is thetestimony of Lucent’s expert.

We agree with Microsoft that there waslittle, if any, direct evidence of infringe-ment. Lucent’s expert testified on cross-examination as follows:


Q: And you didn’t provide any evidenceof anybody, any of Dell’s customers, forexample, who actually performed all ofthe steps of the claims, right?A: Well, I can confess here and nowthat as a Dell customer, I did performall steps of this claim many, many times.Q: When did you do it?A: Oh, back in—we’ve had Quicken onour Windows machines since around 898or 899. So I’ve used that particular pieceof software extensively using these tools.Q: These gentlemen sitting over heremay want to talk to you after you get offthe stand.A: I’m afraid they may.Q: But you didn’t produce any evidenceto this jury that anybody other thanLucent’s trial team and its witnesseswho actually performed every singlestep of the claim, is that fair?A: Again, my wife performed them all,so—

J.A. 07517. As is evident, Microsoft cor-rectly points out that Lucent’s direct evi-dence of infringement was limited.

If that were the only evidence of per-forming the claimed method, we wouldlikely have to reverse. Nevertheless, cir-cumstantial evidence was just adequate topermit a jury to find that at least oneother person within the United States dur-ing the relevant time period, other thanthe expert, had performed the claimedmethod. Lucent’s expert testified that‘‘[i]t’s hard to imagine that we’re the onlytwo people in the world that ever used it.’’J.A. 07517. As Lucent notes ‘‘Microsoftnot only designed the accused products topractice the claimed invention, but alsoinstructed its customers to use the accusedproducts in an infringing way.’’

An informative case is Moleculon Re-search Corp. v. CBS, Inc., 793 F.2d 1261(Fed.Cir.1986), in which we affirmed a dis-trict court’s finding of direct infringementbased on circumstantial evidence. In Mo-

leculon, the district court held that thepatentee ‘‘had met its burden of showinginfringement under section 271(b) with cir-cumstantial evidence of extensive puzzlesales, dissemination of an instruction sheetteaching the method of restoring the pre-selected pattern with each puzzle, and theavailability of a solution booklet on how tosolve the puzzle.’’ Id. at 1272. Similarly,in the present case, the jury reviewedevidence relating to the extensive sales ofMicrosoft products and the disseminationof instruction manuals for the Microsoftproducts. The jury also heard corre-sponding testimony from Lucent’s in-fringement expert. The circumstantialdocumentary evidence, supplementing theexperts’ testimony, was just barely suffi-cient to permit the jury to find directinfringement by a preponderance of theevidence. As in Moleculon, the jury in thepresent case could have reasonably con-cluded that, sometime during the relevantperiod from 2003 to 2006, more likely thannot one person somewhere in the UnitedStates had performed the claimed methodusing the Microsoft products. See Molec-ulon, 793 F.2d at 1272 (‘‘It is hornbook lawthat direct evidence of a fact is not neces-sary. ‘Circumstantial evidence is not onlysufficient, but may also be more certain,satisfying and persuasive than direct evi-dence.’ ’’ (quoting Michalic v. ClevelandTankers, Inc., 364 U.S. 325, 330, 81 S.Ct. 6,5 L.Ed.2d 20 (1960))); see also Alco Stan-dard Corp. v. Tenn. Valley Auth., 808 F.2d1490, 1503 (Fed.Cir.1986) (‘‘Although theevidence of infringement is circumstantial,that does not make it any less credible orpersuasive.’’).

In challenging the jury’s verdict, Micro-soft contends that two cases control ourreview: ACCO Brands, Inc. v. ABA LocksManufacturer Co., 501 F.3d 1307 (Fed.Cir.2007), and E–Pass Technologies, Inc. v.3Com Corp., 473 F.3d 1213 (Fed.Cir.2007).Although similar, these precedents differ


enough from the facts of the present case,thus allowing the jury’s verdict to stand.In ACCO Brands, we held that a jury’sfinding of induced infringement was notsupported by substantial evidence. 501F.3d at 1314. ACCO, the patentee, reliedonly on its expert’s testimony that the‘‘natural and intuitive way to employ’’ theaccused product, a computer lock, was inan infringing mode. Id. at 1312. Impor-tantly, however, ACCO’s expert ‘‘had noopinion’’ on the issue of ‘‘whether usersother than himself used the lock in theinfringing manner.’’ Id. at 1313. Fur-thermore, the locks were sold not onlywithout instructions teaching the infring-ing method, but with instructions teachingthe non-infringing use. Id. The jury alsohad no evidence suggesting that the U.S.distributor of the locks was aware of anyinfringing instructions. Id.

In a similar vein, E–Pass does not com-pel the overturning of the jury’s verdict.There, the patentee tried to rely on ‘‘ex-cerpts from the product manuals for vari-ous of the accused devices.’’ 473 F.3d at1222. All the court had before it, however,was evidence ‘‘show[ing], at best, that thePalm defendants taught their customerseach step of the claimed method in iso-lation.’’ Id. Thus, in both ACCO Brandsand E–Pass, the patentees failed to intro-duce even circumstantial evidence of in-fringing acts.

Microsoft also misreads our holding inBall Aerosol & Specialty Container, Inc. v.Limited Brands, Inc., 555 F.3d 984 (Fed.Cir.2009). There, we reversed the districtcourt’s grant of summary judgment of in-fringement of a patent claiming a candletin with a removable cover that also acts asa base for the candle holder. The issue inBall Aerosol was one of claim constructionrather than whether circumstantial evi-

dence proved infringement. The patenteeargued that ‘‘an apparatus patent claimwith functional elements is infringed if theaccused product is reasonably capable ofbeing used without substantial modifica-tion in the manner recited in the claim.’’Id. at 994. The patentee conceded thatthere was ‘‘no proof that the Travel Candlewas ever placed in the infringing configu-ration.’’ Id. at 995.

Without doubt, Lucent would have beenon much firmer ground had it introducedsome direct evidence of using the claimedmethod. Nevertheless, Lucent’s circum-stantial evidence of infringement was‘‘something less than the weight of theevidence,’’ Consolo v. Fed. MaritimeComm’n, 383 U.S. 607, 620, 86 S.Ct. 1018,16 L.Ed.2d 131 (1966), yet it was just‘‘more than a mere scintilla,’’ Consol. Edi-son Co. v. NLRB, 305 U.S. 197, 229, 59S.Ct. 206, 83 L.Ed. 126 (1938). Accord-ingly and for these reasons, we are notconvinced that the district court erred indenying Microsoft’s JMOL motion with re-spect to infringement. For similar rea-sons, substantial evidence supports thejury’s finding as it relates to direct in-fringement by the use of Microsoft Moneyand Windows Mobile.

[13] Microsoft also complains that theinfringement finding was erroneous be-cause Microsoft Outlook does not contain a‘‘composition tool.’’ 6 This argument like-wise fails. A Lucent expert, Mr. BruceTognazzini, testified that the calendar toolin Outlook works by combining informa-tion to compose a complete date. He fur-ther explained that a composition tool isone that has ‘‘the ability to combine’’ infor-mation. A Microsoft expert, Mr. DaleBuscaino, appeared to concede this pointas well, admitting that ‘‘a composition tool

6. Microsoft does not dispute that both Moneyand Windows Mobile contain composition

tools.


allows a user to put together parts.’’ Al-though most of Microsoft’s expert testimo-ny disputed whether Outlook contained acomposition tool, that testimony was insuf-ficient to require a reasonable jury to findas a factual matter only noninfringement.

B. Contributory Infringement

[14] Under 35 U.S.C. § 271(c), a partyis liable for infringement if he ‘‘offers tosell or sells within the United States orimports into the United States TTT a mate-rial or apparatus for use in practicing apatented process, constituting a materialpart of the invention, knowing the same tobe especially made or especially adaptedfor use in an infringement of such patent,and not a staple article or commodity ofcommerce suitable for substantial nonin-fringing use.’’ ‘‘In order to succeed on aclaim of contributory infringement, in ad-dition to proving an act of direct infringe-ment, plaintiff must show that defendant‘knew that the combination for which itscomponents were especially made wasboth patented and infringing’ and that de-fendant’s components have ‘no substantialnon-infringing uses.’ ’’ Cross Med. Prods.,Inc. v. Medtronic Sofamor Danek, Inc.,424 F.3d 1293, 1312 (Fed.Cir.2005) (quot-ing Golden Blount, Inc. v. Robert H. Pe-terson Co., 365 F.3d 1054, 1061 (Fed.Cir.2004)).

[15] According to Microsoft, Lucentdid not prove contributory infringementbecause the products have substantial non-infringing uses. Lucent counters that thedate-picker tool does not have any nonin-fringing uses. Thus, as framed by theparties, the main issue reduces to whetherthe ‘‘material or apparatus’’ is the entiresoftware package or just the particulartool (e.g., the calendar date-picker) thatperforms the claimed method. If the for-mer, then Microsoft prevails because theentire software package has substantialnoninfringing uses. If the material or ap-

paratus is the specific date-picker tool,then Lucent wins because that tool was‘‘especially made or especially adapted for’’practicing the claimed method.

One example illustrates the problemwith Microsoft’s approach. Consider asoftware program comprising five—andonly five—features. Each of the five fea-tures is separately and distinctly patentedusing a method claim. That is, the firstfeature infringes a method claim in a firstpatent, the second feature infringes amethod claim in a second patent, and soforth. Assume also that the company sell-ing the software doesn’t provide specificinstructions on how to use the five fea-tures, thus taking potential liability outsidethe realm of § 271(b). In this scenario,under Microsoft’s position, the softwareseller can never be liable for contributoryinfringement of any one of the methodpatents because the entire software pro-gram is capable of substantial noninfring-ing use. This seems both untenable as apractical outcome and inconsistent withboth the statute and governing precedent.

Similarly, if, instead of selling Outlookwith the date-picker, Microsoft had offeredthe date-picker for sale as a separatedownload to be used with Outlook, therewould be little dispute that Microsoft wascontributing to infringement of the Daypatent. As we explained in Ricoh Co. v.Quanta Computer Inc., 550 F.3d 1325,1337 (Fed.Cir.2008), cert. denied, ––– U.S.––––, 129 S.Ct. 2864, 174 L.Ed.2d 578(2009), an infringer ‘‘should not be permit-ted to escape liability as a contributoryinfringer merely by embedding [the in-fringing apparatus] in a larger productwith some additional, separable feature be-fore importing and selling it.’’

Microsoft puts much reliance on Hodoshv. Block Drug Co., 833 F.2d 1575 (Fed.Cir.1987). Microsoft understands Hodosh torequire ‘‘a focus on the product actually


sold, not on a mere ingredient.’’ Underthis view, Microsoft didn’t contribute toinfringement because ‘‘[e]ach accusedproduct had substantial noninfringinguses.’’ Instead, according to Microsoft,the district court ‘‘eviscerate[d] Hodoshand read[ ] ‘substantial noninfringing use’out of the statute.’’

But our court has previously rejectedthe interpretation of Hodosh urged by Mi-crosoft on appeal:

[T]his reading of Hodosh divorces thecourt’s holding from the facts uponwhich it was rendered. In focusing on‘‘what was actually sold,’’ the Hodoshcourt rejected the argument that an oth-erwise infringing product may automat-ically escape liability merely because itcontains a noninfringing staple ingredi-entTTTT It does not follow from Hodoshthat the inclusion of a component withsubstantial noninfringing uses in a prod-uct that contains other components use-ful only to infringe a process patent canor should defeat liability for contributoryinfringement under § 271(c).

Ricoh, 550 F.3d at 1339–40.More importantly, Microsoft fails to ap-

preciate the factual basis for Hodosh’sholding. In Hodosh, the patent at issueclaimed ‘‘a method for desensitizing teethwith a composition containing an alkalimetal nitrate.’’ 833 F.2d at 1576. Theaccused infringer sold toothpaste, e.g.,‘‘Sensodyne–F,’’ containing potassium ni-trate, an alkali metal nitrate. Id.; see alsoHodosh v. Block Drug Co., 786 F.2d 1136,1137 (Fed.Cir.1986). The accused infring-er argued that the sale of the toothpaste,which itself was not patented, could notconstitute contributory infringement be-cause the toothpaste contained a staplearticle, i.e., potassium nitrate. Hodosh,833 F.2d at 1578. The court rejected thisargument. While potassium nitrate, whensold in bulk form, was ‘‘a staple article orcommodity of commerce suitable for sub-

stantial noninfringing use,’’ it was suitableonly for the infringing use when sold as aningredient in the toothpaste specially madeto perform the patented method of desen-sitizing teeth.

Here, the infringing feature for complet-ing the forms, i.e., the date-picker tool, issuitable only for an infringing use. Inclu-sion of the date-picker feature within alarger program does not change the date-picker’s ability to infringe. Because Mi-crosoft included the date-picker tool inOutlook, the jury could reasonably con-clude, based on the evidence presented,that Microsoft intended computer users touse the tool—perhaps not frequently—andthe only intended use of the tool infringedthe Day patent. See Metro–Goldwyn–Mayer Studios Inc. v. Grokster, Ltd., 545U.S. 913, 932, 125 S.Ct. 2764, 162 L.Ed.2d781 (2005) (explaining that the contributo-ry infringement doctrine ‘‘was devised toidentify instances in which it may be pre-sumed from distribution of an article incommerce that the distributor intendedthe article to be used to infringe another’spatent, and so may justly be held liable forthat infringement’’).

Finally, Microsoft contends that § 271(c)is not applicable here. Relying solely onMicrosoft Corp. v. AT & T Corp., 550 U.S.437, 127 S.Ct. 1746, 167 L.Ed.2d 737(2007), without further analysis, Microsoftcontends that its ‘‘products are not a ‘ma-terial or apparatus’ as the statute requiresfor contributory infringement of patentedmethods.’’ We need only respond that theSupreme Court in Microsoft did not ad-dress the meaning of ‘‘material or appara-tus’’ in § 271(c).

C. Inducing Infringement

[16–20] A party who ‘‘actively inducesinfringement of a patent shall be liable asan infringer.’’ 35 U.S.C. § 271(b). Underthis provision, ‘‘[t]he plaintiff has the bur-


den of showing that the alleged infringer’sactions induced infringing acts and that heknew or should have known his actionswould induce actual infringements.’’Manville Sales Corp. v. Paramount Sys.,Inc., 917 F.2d 544, 553 (Fed.Cir.1990),quoted in DSU Med. Corp. v. JMS Co.,471 F.3d 1293, 1306 (Fed.Cir.2006) (enbanc in relevant part). ‘‘[A] finding of in-ducement requires a threshold finding ofdirect infringement—either a finding ofspecific instances of direct infringement ora finding that the accused products neces-sarily infringe.’’ Ricoh, 550 F.3d at 1341(citing ACCO Brands, 501 F.3d at 1313).‘‘[I]nducement requires evidence of culpa-ble conduct, directed to encouraging an-other’s infringement, not merely that theinducer had knowledge of the direct in-fringer’s activities.’’ DSU Med., 471 F.3dat 1306. A plaintiff may still prove theintent element through circumstantial evi-dence, just as with direct infringement, asdiscussed above. See id.; see also FujiPhoto Film Co. v. Jazz Photo Corp., 394F.3d 1368, 1377 (Fed.Cir.2005) (‘‘A paten-tee may prove intent through circumstan-tial evidence.’’); Water Techs. Corp. v.Calco, Ltd., 850 F.2d 660, 668 (Fed.Cir.1988) (‘‘While proof of intent is necessary,direct evidence is not required; rather,circumstantial evidence may suffice.’’).Evidence of active steps taken to induceinfringement, such as advertising an in-fringing use, can support a finding of anintention for the product to be used in aninfringing manner. DSU Med., 471 F.3dat 1305 (citing Grokster, 545 U.S. at 932,125 S.Ct. 2764).

[21] Microsoft argues that Lucentcan’t prove inducement because the soft-ware products are merely capable of in-fringing and the evidence didn’t show therequisite intent to induce. As Microsoftsees it, ‘‘all Lucent has shown is that‘hypothetical direct infringement’ mightresult if users choose particular options ineach accused product.’’ Relying on DSU

Medical and Kyocera Wireless Corp. v.International Trade Commission, 545F.3d 1340 (Fed.Cir.2008), Microsoft con-tends that

Lucent presented only the same circum-stantial evidence regarding the allegedpossibility of using the accused productsto infringe—marketing materials andhelp files—as evidence of intent to in-duce infringement of the Day patent.With regard to Outlook, for example,Lucent relied on materials generally de-scribing Outlook’s use of forms and itscalendar feature. No evidence showedthat Microsoft encouraged use of thedate-picker or even mentioned the date-picker specifically. With regard toMoney, the evidence showed that Micro-soft encouraged customers to enter in-formation by downloading it from theInternet, which avoids manually fillingout the transaction form. And for Win-dows Mobile, Lucent presented evidenceof general instructions on how to use theproduct and statements promoting itsgeneral use of forms and ease of use.None of these materials induces custom-ers to use a composition tool to fill out acomputer-based form.

Appellant Br. 52 (citations omitted).

Lucent responds, asserting that ‘‘Micro-soft both encouraged others to commit in-fringing acts and knew or should haveknown that its conduct would result indirect infringement.’’ Lucent cites its ex-pert’s testimony as supporting the jury’sfinding that ‘‘the infringing pop-up toolfunctionality is pervasive in the accusedproducts; that the normal and intendedoperation of those products used the in-fringing functionality; and that Microsoftencouraged and intended users to in-fringe.’’ Lucent also argues that the evi-dence ‘‘established that onscreen pop-uptools are critical to the functionality of theaccused products,’’ and that ‘‘Microsoft


provided instruction, tutorials, and othermaterials directing users to operate theaccused products in an infringing manner.’’

Having perused the evidence, we agreewith Microsoft that the evidence is notstrong, but we are not persuaded that thejury was unreasonable in finding that Mi-crosoft possessed the requisite intent toinduce at least one user of its products toinfringe the claimed methods. With re-spect to inducing infringement with Out-look, Lucent points to the following testi-mony of its expert.

Q: Does Microsoft intend users to usethe forms and the different tools that wejust looked at?A: Yes, definitely. It would be—you’dbe unable to use the application andavoid forms.Q: So would you say then the formentry and the predefined tools of Micro-soft Outlook form a material part of thelimitations of claim 19 of the Day pat-ent?A: Yes.Q: And the Outlook is specifically de-signed to use these forms and thesepredefined tools?A: Yes, it is.Q: Does Microsoft know that Outlookwas designed to perform in that fashion?A: Yes. Again, they designed it. Sothey know they designed it to do that.

J.A. 07441–42. At one point, Lucent’s in-fringement expert explained, on cross-ex-amination, how certain Microsoft docu-mentation encouraged users to use theinfringing tool.

Q: Okay. Let’s look at [the document].Access shared team calendars in Outlook2003. View multiple calendars side byside to make scheduling meetings fastand more convenient.A: Right.Q: Is it the part about schedulingmeetings—A: That’s correct.

Q:—that you now say is encouragingthis method of Claim 19?A: Well, yeah. You schedule meetingsusing this appointment form.

J.A. 07510. Additional circumstantial evi-dence lends further, albeit limited, supportfor the jury’s factual finding of intent.And our review reveals slightly strongercircumstantial evidence of intent concern-ing Windows Mobile and Microsoft Money.

For these reasons, we affirm the districtcourt’s denial of Microsoft’s motion forJMOL that Microsoft did not induce in-fringement of the Day patent.

IV. Damages

Based on the evidence of record, Micro-soft (and Dell) sold approximately 110 mil-lion units of the three software productscapable of practicing the methods of theasserted claims. The total dollar value ofthe sales was approximately $8 billion. Attrial, Lucent’s theory of damages wasbased on 8% of sales revenue for the ac-cused software products, and it asked thejury to award $561.9 million based on Mi-crosoft’s infringing sales. Microsoft coun-tered that a lump-sum payment of $6.5million would have been the correctamount for licensing the protected technol-ogy. See Lucent Techs., 580 F.Supp.2d at1042 & n. 7.

Microsoft challenges the jury’s damagesaward on several bases. First, Microsoftargues that the jury should not have ap-plied the entire market value rule to thevalue of its three software products. Mi-crosoft’s second argument for reversingthe damages award is that, for methodclaims, Dynacore Holdings Corp. v. U.S.Philips Corp., 363 F.3d 1263 (Fed.Cir.2004), requires that damages be limited tothe proven number of instances of actualinfringing use. Microsoft states that,‘‘[u]nder Dynacore, Lucent had to tie itsdamages claim to demonstrated instances


of direct infringement.’’ For the reasonsstated below, we reject both arguments aspresented by Microsoft. We agree, never-theless, with Microsoft’s argument thatsubstantial evidence does not support thejury’s verdict of a lump-sum royalty pay-ment of $357,693,056.18. Further, to theextent the jury relied on an entire marketvalue calculation to arrive at the lump-sumdamages amount, that award is not sup-ported by substantial evidence and isagainst the clear weight of the evidence.

A. Reasonable Royalty

‘‘Upon finding for the claimant the courtshall award the claimant damages ade-quate to compensate for the infringement,but in no event less than a reasonableroyalty for the use made of the inventionby the infringer, together with interestand costs as fixed by the court.’’ 35U.S.C. § 284. As the Supreme Court hasframed the general issue of determiningdamages, at least for competitors, a courtmust ask, ‘‘[H]ad the Infringer not infring-ed, what would [the] Patent Holder[ ] havemade?’’ Aro Mfg. Co. v. Convertible TopReplacement Co., 377 U.S. 476, 507, 84S.Ct. 1526, 12 L.Ed.2d 457 (1964); see alsoPall Corp. v. Micron Separations, Inc., 66F.3d 1211, 1223 (Fed.Cir.1995) (‘‘[T]he pur-pose of compensatory damages is not topunish the infringer, but to make the pat-entee whole.’’). In the Supreme Court’swords, awarding damages through litiga-tion attempts to assess ‘‘the difference be-tween [the patentee’s] pecuniary conditionafter the infringement, and what his condi-tion would have been if the infringementhad not occurred.’’ Yale Lock Mfg. Co. v.Sargent, 117 U.S. 536, 552, 6 S.Ct. 934, 29L.Ed. 954 (1886).

[22, 23] The burden of proving dam-ages falls on the patentee. Dow Chem. Co.v. Mee Indus., Inc., 341 F.3d 1370, 1381(Fed.Cir.2003); Kearns v. Chrysler Corp.,32 F.3d 1541, 1551 (Fed.Cir.1994). Two

alternative categories of infringement com-pensation are the patentee’s lost profitsand the reasonable royalty he would havereceived through arms-length bargaining.See Panduit Corp. v. Stahlin Bros. FibreWorks, Inc., 575 F.2d 1152, 1157 (6th Cir.1978) (Markey, J.). Lost profits are not atissue in the present case. A reasonableroyalty is, of course, ‘‘merely the floorbelow which damages shall not fall.’’Bandag, Inc. v. Gerrard Tire Co., 704 F.2d1578, 1583 (Fed.Cir.1983).

[24–27] Litigants routinely adopt sev-eral approaches for calculating a reason-able royalty. The first, the analyticalmethod, focuses on the infringer’s projec-tions of profit for the infringing product.See TWM Mfg. Co. v. Dura Corp., 789F.2d 895, 899 (Fed.Cir.1986) (describingthe analytical method as ‘‘subtract[ing] theinfringer’s usual or acceptable net profitfrom its anticipated net profit realizedfrom sales of infringing devices’’); see alsoJohn Skenyon et al., Patent Damages Law& Practice § 3:4, at 3–9 to 3–10 (2008)(describing the analytical method as ‘‘cal-culating damages based on the infringer’sown internal profit projections for the in-fringing item at the time the infringementbegan, and then apportioning the project-ed profits between the patent owner andthe infringer’’). The second, more com-mon approach, called the hypothetical ne-gotiation or the ‘‘willing licensor-willing li-censee’’ approach, attempts to ascertainthe royalty upon which the parties wouldhave agreed had they successfully negoti-ated an agreement just before infringe-ment began. See Georgia–Pacific Corp. v.U.S. Plywood Corp., 318 F.Supp. 1116,1120 (S.D.N.Y.1970); see also Rite–HiteCorp. v. Kelley Co., 56 F.3d 1538, 1554 n.13 (Fed.Cir.1995) (en banc); Radio Steel &Mfg. Co. v. MTD Prods., Inc., 788 F.2d1554, 1557 (Fed.Cir.1986) (‘‘The determina-tion of a reasonable royalty, however, is


based not on the infringer’s profit, but onthe royalty to which a willing licensor anda willing licensee would have agreed at thetime the infringement began.’’); Panduit,575 F.2d at 1159 (‘‘Among the relevantfacts are: what plaintiff’s property was, towhat extent defendant has taken it, itsusefulness and commercial value as shownby its advantages over other things and bythe extent of its use, and the commercialsituation.’’ (citations and quotation marksomitted)). The hypothetical negotiationtries, as best as possible, to recreate the exante licensing negotiation scenario and todescribe the resulting agreement. In oth-er words, if infringement had not occurred,willing parties would have executed a li-cense agreement specifying a certain roy-alty payment scheme. The hypotheticalnegotiation also assumes that the assertedpatent claims are valid and infringed.

In the present appeal, the parties, inoffering the damages evidence, eachadopted the hypothetical negotiation ap-proach, without objection. Both Microsoftand Lucent must therefore accept that anyreasonable royalty analysis ‘‘necessarily in-volves an element of approximation anduncertainty.’’ Unisplay, 69 F.3d at 517.We review the damages award within theGeorgia–Pacific framework.

Before the district court, Lucent askedfor a damages award based only on arunning royalty. Microsoft, on the otherhand, told the jury that the damagesshould be a lump-sum royalty payment of$6.5 million. Based on the verdict form,the jury decided on a lump-sum award, nota running royalty. The verdict form notesa lump-sum damages amount and noamount (i.e., zero or ‘‘N/A’’) on the linesfor a running royalty. Faced with thejury’s selection, our task is to determinewhether substantial evidence supports alump-sum, paid-in-full royalty of approxi-mately $358 million for Microsoft’s indirectinfringement of the Day patent. To do

this, we must decide whether substantialevidence supports the jury’s implicit find-ing that Microsoft would have agreed to, atthe time of the hypothetical negotiation, alump-sum, paid-in-full royalty of about$358 million. In performing this analysis,we focus mainly on the damages case as itapplies to Microsoft Outlook, as infringe-ment by the use of Outlook apparentlyconstituted the vast majority of the award.We focus also on the relevant Georgia–Pacific factors, as presented to the jurythrough all the evidence and particularlythe experts’ testimony.

We also note the following at the outsetof our analysis. Microsoft does not argueon appeal that any of the evidence relevantto the damages award was improperly be-fore the jury. At times, Microsoft’s briefsseem to suggest that the district courtjudge ‘‘abdicated’’ her role as a gatekeep-er. The responsibility for objecting to evi-dence, however, remains firmly with theparties. Here, the record reveals that, attrial, Microsoft objected neither to the in-troduction of any of the licenses discussedbelow nor to the testimony of Lucent’sexpert as it related to those licenses. Inthis instance, the district court judge hadno independent mandate to exclude any ofthat evidence. Therefore, we must acceptthat the licensing agreements and otherevidence were properly before the jury.Any implicit objection on appeal is deemedwaived by failing to object at trial.

1. Factor 2

[28] The second Georgia–Pacific factoris ‘‘[t]he rates paid by the licensee for theuse of other patents comparable to thepatent in suit.’’ 318 F.Supp. at 1120. Thisfactor examines whether the licenses reliedon by the patentee in proving damages aresufficiently comparable to the hypotheticallicense at issue in suit. See Russell L. Parr,Royalty Rates for Licensing Intellectual


Property 64 (2007) (‘‘For similar licenseagreements to be used as a proxy forderivation of a fair market royalty, theform of license compensation should be ona like-kind basis.’’). Subsumed within thisfactor is the question of whether the li-censor and licensee would have agreed to alump-sum payment or instead to a runningroyalty based on ongoing sales or usage.

Significant differences exist between arunning royalty license and a lump-sumlicense. In a standard running royaltylicense, the amount of money payable bythe licensee to the patentee is tied directlyto how often the licensed invention is laterused or incorporated into products by thelicensee. A running royalty structureshifts many licensing risks to the licensorbecause he does not receive a guaranteedpayment. Royalties are dependent on thelevel of sales or usage by the licensee,which the licensee can often control.

Compared to a running royalty analysis,a lump-sum analysis involves differentconsiderations. A lump-sum license ‘‘ben-efits the patentholder in that it enablesthe company to raise a substantial amountof cash quickly and benefits the target[i.e., the licensee] by capping its liabilityand giving it the ability, usually for the re-mainder of the patent term, to actually usethe patented technology in its own prod-ucts without any further expenditure.’’Richard F. Cauley, Winning the PatentDamages Case 47 (2009). The lump-sumlicense removes or shifts certain risks in-herent in most arms-length agreements.A lump-sum license removes any risk thatthe licensee using the patented inventionwill underreport, e.g., engage in false re-porting, and therefore underpay, as canoccur with a running royalty agreement.Additionally, for both contracting parties,the lump-sum license generally avoids on-going administrative burdens of monitor-ing usage of the invention.

A further, important consideration isthat an upfront, paid-in-full royalty re-moves, as an option for the licensee, theability to reevaluate the usefulness, andthus the value, of the patented technologyas it is used and/or sold by the licensee.As generally employed, once a lump-sumlicense is duly executed, the licensee isobligated to pay the entire, agreed-uponamount for the licensed technology, re-gardless of whether the technology is com-mercially successful or even used. A licen-see to a lump-sum agreement, under usuallicensing terms, cannot later ask for arefund from the licensor based on a subse-quent decision not to use the patentedtechnology. There is no provision for buy-er’s remorse.

The lump-sum structure also createsrisks for both parties. The licensed tech-nology may be wildly successful, and thelicensee may have acquired the technologyfor far less than what later proved to be itseconomic value. The alternative risk, ofcourse, is the licensee may have paid alump-sum far in excess of what the patent-ed invention is later shown to be worth inthe marketplace.

As noted, Lucent’s licensing expert,Roger Smith, argued for damages basedsolely on a running royalty rate. Smithemphasized his choice of a running royaltyover a lump-sum payment.

Q: Now, in each case, in the [otherpatents in suit] and then finally the Day356 form entry patent, in each caseyou’ve selected a running royalty struc-ture for your reasonable royalty; is thatright?

A: I certainly did, yes.

J.A. 07805. He also explained that ‘‘therunning royalty in a hypothetical negotia-tion such as the one we’re considering herewould be appropriate, even though lump-sum does have the advantage that brings


the money up front or at least some of it.’’Id.

On appeal, however, Lucent defends thedamages award, contending that substan-tial evidence supports the lump-sum awardof about $358 million. This is problematicfor several reasons. First, no evidence ofrecord establishes the parties’ expectationsabout how often the patented methodwould be used by consumers. Second, thejury heard little factual testimony explain-ing how a license agreement structured asa running royalty agreement is probativeof a lump-sum payment to which the par-ties would have agreed. Third, the licenseagreements for other groups of patents,invoked by Lucent, were created fromevents far different from a license negotia-tion to avoid infringement of the one pat-ent here, the Day patent.

Parties agreeing to a lump-sum royaltyagreement may, during the license negoti-ation, consider the expected or estimatedusage (or, for devices, production) of agiven invention, assuming proof is present-ed to support the expectation, because themore frequently most inventions are used,the more valuable they generally are andtherefore the larger the lump-sum pay-ment. Conversely, a minimally used fea-ture, with all else being equal, will usuallycommand a lower lump-sum payment. Inthis case, Lucent identifies no documenta-ry evidence or testimony showing the par-ties’ expectations as to usage of theclaimed method. Lucent submitted no evi-dence upon which a jury could reasonablyconclude that Microsoft and Lucent wouldhave estimated, at the time of the negotia-tion, that the patented date-picker featurewould have been so frequently used orvalued as to command a lump-sum pay-ment that amounts to approximately 8% ofthe sale price of Outlook. Cf. InteractivePictures Corp. v. Infinite Pictures, Inc.,274 F.3d 1371, 1384–85 (Fed.Cir.2001) (ac-cepting as suitable factual evidence thepatentee’s ‘‘business plan and its projec-

tions for future sales’’ prepared ‘‘twomonths before infringement began’’).

Lucent’s expert Mr. Smith did try toexplain how one would calculate what anacceptable lump-sum would be.

Q: Well, when one is considering whatthe magnitude of a lump-sum paymentmight be, does one ever look at what theexpected royalty—total royalty would beproduced by a running royalty based onthe available information at that time?A: That generally is the way a lumpsum would be determined, by looking atwhat the running royalty—what the val-ue of each use of the patent might beand then speculating as to the extent ofthe future use.

J.A. 07805 (emphasis added). But an ex-planation urging jurors to rely on specula-tion, without more, is often insufficient.See Novosteel SA v. United States, 284F.3d 1261, 1276 (Fed.Cir.2002) (Dyk, J.,dissenting) (‘‘It is well established thatspeculation does not constitute ‘substantialevidence.’ ’’). Smith repeated his ‘‘lump-sum speculation theory’’ when he told thejury that parties ‘‘speculate’’ as to whatthey expect the future to be like whennegotiating a lump-sum payment for a pat-ent license. In short, Smith’s testimonycould be interpreted as suggesting to thejury that it was proper to ‘‘speculate’’ as tothe proper lump-sum damages amounteven though he may have intended theword ‘‘speculate’’ to mean ‘‘estimate.’’

Despite this shortcoming in its evidence,Lucent relies on eight varied license agree-ments which purportedly support thejury’s lump-sum damages award. Whenwe examine these license agreements,along with the relevant testimony, we areleft with two strong conclusions. First,some of the license agreements are radi-cally different from the hypothetical agree-ment under consideration for the Day pat-ent. Second, with the other agreements,


we are simply unable to ascertain from theevidence presented the subject matter ofthe agreements, and we therefore cannotunderstand how the jury could have ade-quately evaluated the probative value ofthose agreements.

Only four of the eight agreements pur-port to be lump-sum agreements: (1) a1993 agreement between Dell and IBM for$290 million; (2) a 1996 agreement be-tween Microsoft and Hewlett–Packard for$80 million; (3) a 1997 agreement betweenMicrosoft and Apple Computer for $93million; and (4) a 1999 agreement betweenMicrosoft and Inprise for $100 million.Lucent’s brief characterizes the fouragreements as covering ‘‘PC-related pat-ents,’’ as if personal computer kinship im-parts enough comparability to support thedamages award. For the latter three, it isimpossible for us, based on the record, todetermine whether the agreements are atall comparable to the hypothetical agree-ment of the present suit. For the firstagreement, what little explanation there isonly underscores the differences betweenit and any hypothetical agreement for theDay patent.

The 1993 agreement between IBM andDell appears to be a modification of their1988 agreement. These two IBM–Dellagreements are vastly different from anyagreement Microsoft and Lucent wouldhave struck for the Day patent at the timeof infringement. As best as we can dis-cern, the 1988 agreement appears to gov-ern IBM’s licensing of its entire patentportfolio protecting its one-time dominancein the personal computer market. SeeJ.A. 08193 (witness testimony explaining incursory fashion the Dell–IBM agreement);see also Dell Computer Co.: Clones ofIBM’s PS/2 Line of Computers An-nounced, The Wall Street Journal, Apr. 19,1988, at 13 (reporting that Dell ‘‘becamethe first company to announce copies ofInternational Business Machines Corp.’s

year-old Personal System/2 computerline’’); Two Companies in Texas Race toClone PS/2, The Wall Street Journal, Apr.8, 1988, at 20 (reporting that IBM was‘‘considering raising the royalty it charges,and plans to be more aggressive in makingsure competitors take out licenses’’ forpersonal computers). At the time, conven-tional wisdom instructed that selling IBMclones required a license to IBM’s patentportfolio. Dell’s business was built aroundselling IBM clones. From this informa-tion, a reasonable juror could only con-clude that the IBM–Dell license agreementfor multiple patents to broad, PC-relatedtechnologies is directed to a vastly differ-ent situation than the hypothetical licens-ing scenario of the present case involvingonly one patent, the Day patent, directedto a narrower method of using a graphicaluser interface tool known as the date-picker. Of course, without more informa-tion about the IBM–Dell agreement, onecan only speculate about how the Dell–IBM agreement could be compared to anylicensing agreement involving the Day pat-ent.

For the other three lump-sum agree-ments, Lucent’s expert supplied no expla-nation to the jury about the subject matteror patents covered by those agreements.For example, the entire substance of Lu-cent’s expert’s testimony about the Micro-soft–Apple agreement amounted to the fol-lowing colloquy:

Q: What did you ascertain or what isPlaintiff’s Exhibit 5150?A: Plaintiff’s Exhibit 5150 is a patentcross-license agreement between Micro-soft and Apple.Q: And what did you find significantabout this cross-license agreement be-tween Microsoft and Apple?A: The slide that’s on the screen showsthat this is a cross-license in which Hew-lett—in which Microsoft gave to Apple


in addition to a license under its patentsa royalty payment or a balancing pay-ment of some $93,000,000.

J.A. 07746.7 Counsel for Lucent immedi-ately followed this exchange with an equal-ly scant inquiry into the Microsoft–Inpriseagreement.

Q: And could you turn in your evidencebinder to Plaintiff’s Exhibit 5151 and tellus what that is?A: 5151 is a patent cross-license agree-ment between Microsoft and a companyknown as Inprise.Q: And if you could turn to slide 41,would that assist the presentation ofyour testimony in connection with thatagreement?A: It would.

* * *THE WITNESS: This call out showsthe essential features of the Inprise Mi-crosoft license agreement which [is] thesame general idea as those which we’vejust been looking at. Microsoft paysInprise a sum of money, in this case$100,000,000, in addition to granting alicense under its patents, and Inprisegets a royalty-free license under Micro-soft’s patents.

J.A. 07746. The jury heard similarly su-perficial testimony about the license agree-ment between Microsoft and Hewlett–Packard. Lucent’s expert merely ob-served that, under the cross-license, Hew-lett–Packard received ‘‘a royalty-freeworldwide fully paid up license under theMicrosoft patents’’ and Microsoft ‘‘agreedin return for a license under Hewlett Pack-

ard’s patents to pay Hewlett Packard thesum of TTT $80,000,000.’’ J.A. 07745.

Lucent candidly admits in its brief that‘‘none of the real world licenses introducedat trial arose from circumstances identicalto those presumed to prevail in the hypo-thetical royalty negotiation.’’ Appellee’sBr. 50. Moreover, the testimony excerpt-ed above belies Lucent’s claim of ‘‘pres-ent[ing] particularized expert testimonyexplaining how various differences be-tween the real and hypothetical licensenegotiations TTT would factor into the ap-propriate royalty for Microsoft’s infringe-ment.’’ Id. The testimony provides noanalysis of those license agreements, otherthan, for example, noting the agreementwas a cross-license of a large patent port-folio and the amount paid. Lucent had theburden to prove that the licenses weresufficiently comparable to support thelump-sum damages award. The law doesnot require an expert to convey all hisknowledge to the jury about each licenseagreement in evidence, but a lump-sumdamages award cannot stand solely on evi-dence which amounts to little more than arecitation of royalty numbers, one of whichis arguably in the ballpark of the jury’saward, particularly when it is doubtful thatthe technology of those license agreementsis in any way similar to the technologybeing litigated here.

Lucent also cites four running-royaltylicense agreements which purportedly pro-vide substantial evidence supporting alump-sum damages award of approximate-ly $358 million. A significant shortcoming

7. The Microsoft–Apple agreement also ap-pears directed to a large collaboration farmore complicated than the patent coveringthe infringing date-picker tool at issue in thepresent appeal. See Press Release, MicrosoftCorp., Microsoft and Apple Affirm Commit-ment to Build Next Generation Software forMacintosh (Aug. 6, 1997), http://www.microsoft. com/pres-

spass/press/1997/aug97/msmacpr.mspx (not-ing that ‘‘[t]he companies agreed to a broadpatent cross-licensing agreement’’ that ‘‘pavesthe way for the two companies to work moreclosely on leading-edge technologies for theMac platform’’). But, in view of the sparserecord, any supposition about the agreementwould again be little more than speculation.


of these agreements is their ‘‘running-roy-alty’’ nature, however. As we noted above,certain fundamental differences exist be-tween lump-sum agreements and running-royalty agreements. This is not to saythat a running-royalty license agreementcannot be relevant to a lump-sum damagesaward, and vice versa. For a jury to use arunning-royalty agreement as a basis toaward lump-sum damages, however, somebasis for comparison must exist in theevidence presented to the jury. In thepresent case, the jury had almost no testi-mony with which to recalculate in a mean-ingful way the value of any of the runningroyalty agreements to arrive at the lump-sum damages award.

Additionally, in its brief before us, Lu-cent appears to misunderstand the natureof a per-unit royalty. Lucent appears toconsider a per-unit royalty as beingequivalent to a lump-sum royalty. SeeAppellee’s Br. 49–50 (‘‘[T]he aforemen-tioned licenses—calling for a lump-sum orcommuted per-unit royalty not calculatedas a function of product revenue—supportthe damages award entirely independentfrom Microsoft’s product revenues.’’).What that statement ignores is the rela-tionship between product revenues andper-unit running royalties. A per-unitrunning royalty is paid based on the num-ber of units ultimately sold (or made,etc.), which is of course directly related toproduct revenues. As more units are sold,more revenue is earned and more royal-ties are paid. If the licensee chooses toomit the patented feature from its com-mercial product, the licensee will general-ly owe no per-unit royalty. Thus, a per-unit running royalty agreement differsfrom a lump-sum agreement in the samegeneral ways a percentage-of-price run-ning royalty agreement differs from alump-sum agreement. See Raymond T.Nimmer & Jeff Dodd, Modern LicensingLaw § 7:4 (2008) (‘‘Most running royaltiesfall into one of two categories: fixed price

per unit and percentage of reve-nue/sales/income.’’).

Furthermore, the running royalty agree-ments put into evidence, as with the lump-sum agreements, differ substantially fromthe hypothetical negotiation scenario in-volving the Day patent. The four runningroyalty agreements upon which Lucent re-lies are agreements between itself and VoxCommunications (‘‘Vox agreement’’); be-tween itself and Kenwood (‘‘Kenwoodagreement’’); between itself and Acer(‘‘Acer agreement’’); and between Micro-soft and MPEG–LA (‘‘MPEG agreement’’).

The Vox agreement covered five Lucentpatents, which, as explained by Lucent’sexpert, are directed to PC graphics boardsmanufactured by Vox. In addition to alump-sum payment of $50,000, Vox agreedto pay a per-unit rate of $2.00 for eachlicensed product. But no testimony de-scribed how the patented technology of theVox agreement relates to the licensedgraphics boards. Lucent’s expert neverexplained to the jury whether the patentedtechnology is essential to the licensedproduct being sold, or whether the patent-ed invention is only a small component orfeature of the licensed product (as is thecase here). The jury also had no informa-tion about the price of Vox’s PC graphicsboards and thus was unable to assess themagnitude of the $2.00 rate, which seemsparticularly relevant given Lucent’s de-fense of an award amounting to about 8%of the market value of Outlook. In theabsence of the price of graphics boards,the $2.00 value is difficult, if not impossi-ble, to evaluate. The testimony of Lu-cent’s expert relating to the Vox agree-ment was confined essentially to the factthat the agreement is a cross-licensingagreement in which the rights granted toLucent were royalty-free and that the roy-alty rate is structured as a commuted rate.


The Kenwood agreement, covering twoLucent patents directed to DVD playerproducts, is a hybrid lump-sum/runningroyalty cross-license agreement. Ken-wood agreed to pay Lucent an up-frontpayment of $3 million along with a per-unitroyalty of $1.50 for each product in excessof 300,000 units. Lucent’s expert told thejury that the Kenwood agreement was across-license, conveying rights to Lucentto practice Kenwood’s patents, but thejury never learned anything about thosepatent rights and how valuable or essentialthose rights were. Even if we were toapply the $1.50 per unit rate of the Ken-wood agreement to the number of infring-ing units that could be used to infringe inthe present case, this would yield onlyabout $165 million, substantially less thanthe $358 million awarded by the jury.

The Acer agreement, executed in 1998,involved eight patents and various com-mercial products. Lucent refers to theAcer agreement as one involving PC-relat-ed patents. During his testimony, Lu-cent’s expert focused almost exclusively onthe per-unit royalty rate of $2.50 and thelump-sum payment of $14.5 million. Butthe jury again did not hear any explana-tion of the types of products covered bythe agreement or the various royalty ratesset forth in the agreement. Specifically,the agreement calls for different royaltiesfor different products. For so-called ‘‘re-portable products,’’ the rate is not a fixeddollar amount but set at 2%, while theroyalty rates for ‘‘semiconductive devices’’is in the range of 1%. Furthermore, Lu-cent did not explain how the fact that theAcer agreement involved eight patents af-fects how probative it is of the Microsoft–Lucent hypothetical negotiation over onepatent. Nor is there any document ortestimony upon which a jury could haveconsidered how similar or dissimilar thepatented technology of the Acer agree-ment is to the invention of using the date-picker. Nor is there any evidence or testi-

mony about how the $2.50 per unit ratecorresponds to a percentage of the cost ofthe ‘‘personal computers’’ sold under thelicense agreement. It is not implausiblethat the average price of the computerssubject to the Acer agreement was close to$1000. See Larry Armstrong, How DidSanta Carry All Those Computers, Busi-ness Week, Jan. 11, 1999, at 46, 46 (notingthat, in November 1999, ‘‘the average sell-ing price of a PC without monitor droppedbelow $1,000 for the first time’’); Roger O.Crockett & Peter Burrows, PC MakersRace to the Bottom, Business Week, Oct.12, 1998, at 48, 48 (noting an average PCprice of about $1,200); Nick Turner, PCWorld Comes to Grips With Less–Is–MoreMentality, Investor’s Business Daily, Dec.30, 1998, at A8 (citing an average PC costof $1,026). Such an average price wouldmean the $2.50 per-unit rate of the Aceragreement equates to approximately one-quarter of one percent of the value of thecomputer, which is about one-thirtieth theconstructive rate awarded to Lucent.

Finally, the MPEG agreement on itsface supports a higher royalty rate of $4per unit. But, as with the other runningroyalty agreements, the structure of theMPEG agreement is more complicated,and the jury had little to no testimonyexplaining how such complexity wouldhave affected the hypothetical negotiationanalysis. Specifically, the 31–page agree-ment contains numerous provisions cover-ing various MPEG-related products (e.g.,decoding products, distribution encodingproducts, program stream products, etc.).Moreover, the various products appear tohave different royalty rates, some as lowas a penny per unit.

We now consider what Microsoft advo-cated, namely that the hypothetical negoti-ation would have yielded a lump-sum li-censing agreement for $6.5 million. Forwhatever reason, Microsoft urged the jury


to accept its theory based on a proffer of asingle license Microsoft had executed for agraphical user interface technology. Thus,at a minimum, a reasonable jury couldhave awarded $6.5 million, or some largeramount as permitted by the evidence. SeeRite–Hite, 56 F.3d at 1555 (‘‘[W]hat aninfringer would prefer to pay is not thetest for damages.’’).

But we see little evidentiary basis underGeorgia–Pacific Factor 2 for awardingroughly three to four times the averageamount in the lump-sum agreements inevidence. Here the award was $358 mil-lion; there, the amounts were $80, 93, 100,and 290 million. That some licenses werecross-licenses or commuted-rate licenses—which may warrant a higher damagesaward—does not fill the evidentiary lacu-nae. Again, it was Lucent’s burden toprove that the licenses relied on were suf-ficiently comparable to sustain a lump-sumdamages award of $358 million. This isnot an instance in which the jury chose adamages award somewhere between maxi-mum and minimum lump-sum amounts ad-vocated by the opposing parties. Cf. FujiPhoto, 394 F.3d at 1378 (‘‘[T]he jury is notbound to accept a rate proffered by oneparty’s expert but rather may choose anintermediate royalty rate.’’). For the rea-sons stated, Factor 2 weighs stronglyagainst the jury’s award.

2. Factors 10 and 13

[29] Factor 10 is ‘‘[t]he nature of thepatented invention; the character of thecommercial embodiment of it as owned andproduced by the licensor; and the benefitsto those who have used the invention.’’Georgia–Pacific, 318 F.Supp. at 1120.Factor 13 is ‘‘[t]he portion of the realizableprofit that should be credited to the inven-tion as distinguished from non-patentedelements, the manufacturing process, busi-ness risks, or significant features or im-provements added by the infringer.’’ Id.These two factors, at least as applied to

the facts of this case, both aim to elucidatehow the parties would have valued thepatented feature during the hypotheticalnegotiation.

The evidence can support only a findingthat the infringing feature contained inMicrosoft Outlook is but a tiny feature ofone part of a much larger software pro-gram. Microsoft’s expert explained thatOutlook’s e-mail component is ‘‘the part ofOutlook that’s most commonly used by ourcustomers.’’ Microsoft’s witness also ex-plained that, in addition to sending andreceiving e-mails, a user can create elec-tronic tasks and notes. Additionally, Out-look can be used as an electronic Rolo-dex{, storing contact information, such asphone numbers, addresses, and the like.It also has a fully functional calendar sys-tem, in which a user can record appoint-ments, meetings, and other items on one’sschedule. As Lucent’s own expert testi-fied, Outlook is a ‘‘personal organizer’’ thatis ‘‘an integrated suite of abilities to do e-mail, to set up contacts, to arrange meet-ings, to maintain your personal calendar,et cetera.’’ In short, Outlook is an enor-mously complex software program com-prising hundreds, if not thousands or evenmore, features. We find it inconceivable toconclude, based on the present record, thatthe use of one small feature, the date-picker, constitutes a substantial portion ofthe value of Outlook.

The parties presented little evidence re-lating to Factor 13. Nonetheless, the onlyreasonable conclusion is that most of therealizable profit must be credited to non-patented elements, such as ‘‘the manufac-turing process, business risks, or signifi-cant features or improvements added by[Microsoft].’’ As explained by Microsoft’sexpert Mr. Kennedy, Outlook consists ofmillions of lines of code, only a tiny frac-tion of which encodes the date-picker fea-ture. Although the weighing of Factor 13


cannot be reduced to a mere counting oflines of code, the glaring imbalance be-tween infringing and non-infringing fea-tures must impact the analysis of howmuch profit can properly be attributed tothe use of the date-picker compared tonon-patented elements and other featuresof Outlook. Here, numerous features oth-er than the date-picker appear to accountfor the overwhelming majority of the con-sumer demand and therefore significantprofit.

The only reasonable conclusion that canbe drawn from this evidence is that theinfringing use of Outlook’s date-picker fea-ture is a minor aspect of a much largersoftware program and that the portion ofthe profit that can be credited to the in-fringing use of the date-picker tool is ex-ceedingly small. For these reasons, Fac-tors 10 and 13 of Georgia–Pacific providelittle support for the jury’s lump-sum dam-ages award of $357,693,056.18.

3. Factor 11

[30] Factor 11 is ‘‘[t]he extent to whichthe infringer has made use of the inven-tion; and any evidence probative of thevalue of that use.’’ Georgia–Pacific, 318F.Supp. at 1120. As with Factors 10 and13, the eleventh factor informs the courtand jury about how the parties would havevalued the patented feature during thehypothetical negotiation. In doing so,Factor 11 relies on evidence about howmuch the patented invention has beenused. Implicit in this factor is the premisethat an invention used frequently is gener-ally more valuable than a comparable in-vention used infrequently.

During oral argument, Microsoft charac-terized as irrelevant information abouthow often the date-picker tool has in factbeen used by consumers of Microsoft prod-ucts. That is so, according to Microsoft,because such facts postdate the time of thehypothetical negotiation. See Hanson v.

Alpine Valley Ski Area, Inc., 718 F.2d1075, 1081 (Fed.Cir.1983) (‘‘The issue ofthe infringer’s profit is to be determinednot on the basis of a hindsight evaluationof what actually happened, but on the basisof what the parties to the hypotheticallicense negotiations would have consideredat the time of the negotiations.’’). Butneither precedent nor economic logic re-quires us to ignore information about howoften a patented invention has been usedby infringers. Nor could they since fre-quency of expected use and predicted val-ue are related.

In Sinclair Refining Co. v. Jenkins Pe-troleum Process Co., 289 U.S. 689, 698, 53S.Ct. 736, 77 L.Ed. 1449 (1933), the Su-preme Court recognized that factual devel-opments occurring after the date of thehypothetical negotiation can inform thedamages calculation:

[A] different situation is presented ifyears have gone by before the evidenceis offered. Experience is then availableto correct uncertain prophecy. Here isa book of wisdom that courts may notneglect. We find no rule of law thatsets a clasp upon its pages, and forbidsus to look within.

Similarly, our case law affirms the avail-ability of post-infringement evidence asprobative in certain circumstances. InFromson v. Western Litho Plate & SupplyCo., 853 F.2d 1568, 1575 (Fed.Cir.1988),overruled on other grounds by Knorr–Bremse Systeme Fuer NutzfahrzeugeGmbH v. Dana Corp., 383 F.3d 1337 (Fed.Cir.2004) (en banc), we observed that thehypothetical negotiation analysis ‘‘permitsand often requires a court to look to eventsand facts that occurred thereafter and thatcould not have been known to or predictedby the hypothesized negotiators.’’

[31] Consideration of evidence of usageafter infringement started can, under ap-propriate circumstances, be helpful to the


jury and the court in assessing whether aroyalty is reasonable. Usage (or similar)data may provide information that the par-ties would frequently have estimated dur-ing the negotiation. See Sinclair Ref., 289U.S. at 697, 53 S.Ct. 736 (‘‘The use thathas been made of the patented device is alegitimate aid to the appraisal of the valueof the patent at the time of the breach.’’).Such data might, depending on the case,come from sales projections based on pastsales, consumer surveys, focus group test-ing, and other sources. Even though par-ties to a license negotiation will usually nothave precise data about future usage, theyoften have rough estimates as to the ex-pected frequency of use. This quantitativeinformation, assuming it meets admissibili-ty requirements, ought to be given itsproper weight, as determined by the cir-cumstances of each case.

On the other hand, we have never laiddown any rigid requirement that damagesin all circumstances be limited to specificinstances of infringement proven with di-rect evidence. Such a strict requirementcould create a hypothetical negotiation far-removed from what parties regularly doduring real-world licensing negotiations.As shown by the evidence in this case,companies in the high-tech computer in-dustry often strike licensing deals in whichthe amount paid for a particular technolo-gy is not necessarily limited to the numberof times a patented feature is used by aconsumer. A company licensing a patent-ed method often has strong reasons not totie the royalty amount strictly to usage.The administrative cost of monitoring us-age can be prohibitively expensive. Fur-thermore, with some inventions, say forexample a method of detecting fires, valueis added simply by having the patentedinvention available for use. Cf. Hanson,718 F.2d at 1080–81 (approving a reason-able royalty not based on ‘‘actual use ofthe snowmaking machinery’’ but on what aparty would have paid to have the machine

available to use). Thus, potential licensorsand licensees routinely agree to royaltypayments regardless of whether the inven-tion is used frequently or infrequently bythe consumer.

With the foregoing in mind, we observethat the evidence of record is conspicuous-ly devoid of any data about how oftenconsumers use the patented date-pickerinvention. In one respect, Lucent believesthe damages award is supported by thepervasive use of forms throughout thethree software programs. What this posi-tion lacks is the requisite focus on theinfringed claim. The damages award can’tbe supported by evidence that the infring-ers also used additional, non-infringingfeatures. Only when the date-picker isused to fill out a form does infringementoccur. All other means of filling out aform, such as typing in the entire date, donot infringe. The damages award ought tobe correlated, in some respect, to the ex-tent the infringing method is used by con-sumers. This is so because this is whatthe parties to the hypothetical negotiationwould have considered. Lucent tries tostretch the claim scope so that claim 19covers all pop-up tools. If this were theproper claim construction, we might haveto reverse the validity ruling. But theclaim construction—which neither partyhas appealed—is not so broad.

Furthermore, Lucent’s reliance on Dy-nacore is unavailing. As we noted above,substantial evidence supports the jury’sverdict of indirect infringement by Micro-soft. But all the circumstantial evidencesupports is the jury’s implicit finding thatat least one person performed the patent-ed method one time in the United Statessometime during the relevant period. Be-yond that finding, all the jury had wasspeculation. No evidence describes howmany Microsoft Outlook users had everperformed the patented method or how


many times. Lucent had the burden toprove that the extent to which the infring-ing method has been used supports thelump-sum damages award.

4. Other Factors

[32] Other Georgia–Pacific factors ap-plicable here include ‘‘[t]he nature andscope of the license, as exclusive or nonex-clusive’’ (Factor 3); ‘‘[t]he licensor’s estab-lished policy and marketing program tomaintain his patent monopoly’’ (Factor 4);‘‘[t]he commercial relationship between thelicensor and the licensee’’ (Factor 5);‘‘[t]he established profitability of the prod-uct made under the patent’’ (Factor 8);‘‘[t]he utility and advantages of the patentproperty over the old modes or devices’’(Factor 9); and ‘‘[t]he portion of the profitor of the selling price that may be custom-ary TTT to allow for the use of the inven-tion’’ (Factor 12). 318 F.Supp. at 1120.To the extent these factors are relevant,they appear somewhat to offset one anoth-er.

For instance, Factor 8, the profitabilityof the product made, supports a higherversus a lower reasonable royalty, giventhe unrebutted evidence that the productsat issue are sold with an approximately 70–80% profit margin. Contrasting this evi-dence are Factors 3 and 9. Non-exclusivelicenses generally command lower royal-ties. See Parr, supra, at 64 (‘‘Typically,higher royalty rates are associated withlicense agreements that provide the licen-see with exclusive rights to use the IP.’’).And, from the evidence presented, the in-fringing use of the date-picker seems tohave, at best, only a slight advantage overwhat is arguably the closest prior art. Weare mindful, however, that a jury couldhave reasonably concluded otherwise withseveral of the factors mentioned here.Even so, such reasonable conclusions, inthis case, cannot overcome the substantialinfirmities in the evidence for the otherfactors detailed above.

5. Conclusion on Lump–Sum Rea-sonable Royalty

[33] Having examined the relevantGeorgia–Pacific factors, we are left withthe unmistakable conclusion that the jury’sdamages award is not supported by sub-stantial evidence, but is based mainly onspeculation or guesswork. When the evi-dence is viewed in toto, the jury’s award ofa lump-sum payment of about $358 milliondoes not rest on substantial evidence andis likewise against the clear weight of theevidence. The evidence does not sustain afinding that, at the time of infringement,Microsoft and Lucent would have agreedto a lump-sum royalty payment subse-quently amounting to approximately 8% ofMicrosoft’s revenues for the sale of Out-look (and necessarily a larger percentageof Outlook’s profits). We need not identifyany particular Georgia–Pacific factor asbeing dispositive. Rather, the flexibleanalysis of all applicable Georgia–Pacificfactors provides a useful and legally-re-quired framework for assessing the dam-ages award in this case. Furthermore, wedo not conclude that the aforementionedlicense agreements (or other evidence)cannot, as a matter of law, support thedamages award in this case. Instead, theevidence as presented did not reach the‘‘substantial evidence’’ threshold andtherefore no reasonable jury could havefound that Lucent carried its burden ofproving that the evidence, under the rele-vant Georgia–Pacific factors, supported alump-sum damages award of$357,693,056.18.

We admit that the above analysis focus-es on Microsoft Outlook, not the other twosoftware programs. Because the damagesaward with respect to infringement byOutlook is not supported by the evidencebut is against the clear weight of the evi-dence, a new trial on damages is neces-sary. We therefore need not specifically


address the evidence as it relates to Micro-soft Money and Windows Mobile. Weleave that to the jury or court to assess onremand. We acknowledge that the factualfindings based on the pertinent Georgia–Pacific factors may not be identical for allthree products. For example, the toolsthat practice the infringing method may beincorporated more (or less) extensivelythroughout Windows Mobile and MicrosoftMoney than in Outlook.

[34] Creating a licensing agreementfor patented technology is, at best, aninexact science. In actual licensing negoti-ations, willing parties negotiating at arms-length do not necessarily generate andanalyze precise economic data concerningthe perceived value of a patented inven-tion. A complicated case this was, and thedamages evidence of record was neithervery powerful, nor presented very well byeither party. Most jury damages awardsreviewed on appeal have been held to besupported by substantial evidence. SeeSkenyon et al., supra, at § 3:20 (summar-izing sixty-two damages cases). Nonethe-less, on post-trial JMOL motions, districtcourt judges must scrutinize the evidencecarefully to ensure that the ‘‘substantialevidence’’ standard is satisfied, while keep-ing in mind that a reasonable royalty anal-ysis ‘‘necessarily involves an element ofapproximation and uncertainty.’’ Unis-play, 69 F.3d at 517.

B. Entire Market Value Analysis

[35] Microsoft argues that the dam-ages award must be reversed because thejury erroneously applied the entire marketvalue rule. Despite the jury’s indicationon the verdict form that it was awarding alump-sum reasonable royalty, Microsoftbelieves that the only way the jury couldhave calculated a figure of $357,693,056.18was by applying a royalty percentage to atotal sales figure of the infringing softwareproducts. Indeed, it is difficult to under-

stand how the jury could have chosen itslump-sum figure down to the penny unlessit used a running royalty calculation. Fur-thermore, as Microsoft explains in itsbrief, working the math backwards strong-ly suggests that the jury must have usedsome calculation of a rate applied to theentire market value of the software. SeeMicrosoft Response and Reply Br. 47(‘‘Applying Lucent’s 8% rate to all of Mi-crosoft’s sales and half of Dell’s, using aweighted average of 85% OEM prices and15% retail prices, yields damages of $358,-835,648—extremely close to the jury’saward.’’ (footnote omitted)). Alternatively,the jury could have simply used a some-what lower rate, such as about 5.5%, ap-plied to the total sales figure. Assumingthat the jury did apply the entire marketvalue rule, such application would amountto legal error for two reasons.

[36] In one sense, our law on the en-tire market value rule is quite clear. Forthe entire market value rule to apply, thepatentee must prove that ‘‘the patent-re-lated feature is the ‘basis for customerdemand.’ ’’ Rite–Hite, 56 F.3d at 1549(quoting State Indus., 883 F.2d at 1580);see also Bose Corp. v. JBL, Inc., 274 F.3d1354, 1361 (Fed.Cir.2001); TWM Mfg., 789F.2d at 901 (‘‘The entire market value ruleallows for the recovery of damages basedon the value of an entire apparatus con-taining several features, when the featurepatented constitutes the basis for customerdemand.’’).

In the distant past, before a contempo-rary appreciation of the economics of in-fringement damages, the Supreme Courtseemingly set forth rigid rules concerningthe entire market value rule. Shortly be-fore the Civil War, in Seymour v. McCor-mick, 57 U.S. (16 How.) 480, 491, 14 L.Ed.1024 (1853), a case involving one of CyrusMcCormick’s famous reaping machine in-ventions, the Court warned that it would


be ‘‘a very grave error to instruct a jury‘that as to the measure of damages thesame rule is to govern, whether the patentcovers an entire machine or an improve-ment on a machine.’ ’’ About a centuryand a quarter ago, in Garretson v. Clark,the Court expressed further concern aboutbasing damages on the value of the entireproduct:

When a patent is for an improvement,and not for an entirely new machine orcontrivance, the patentee must show inwhat particulars his improvement hasadded to the usefulness of the machineor contrivance. He must separate itsresults distinctly from those of the otherparts, so that the benefits derived fromit may be distinctly seen and appreciat-edTTTT The patentee TTT must in everycase give evidence tending to separateor apportion the defendant’s profits andthe patentee’s damages between the pat-ented feature and the unpatented fea-tures, and such evidence must be reli-able and tangible, and not conjectural orspeculative; or he must show, by equallyreliable and satisfactory evidence, thatthe profits and damages are to be calcu-lated on the whole machine, for the rea-son that the entire value of the wholemachine, as a marketable article, isproperly and legally attributable to thepatented feature.

111 U.S. 120, 121, 4 S.Ct. 291, 28 L.Ed. 371(1884) (quotation marks omitted). Andearly last century, the Court elaborated onthis theme:

[An] invention may have been used incombination with valuable improvementsmade, or other patents appropriated bythe infringer, and each may have jointly,but unequally, contributed to the profits.In such case, if plaintiff’s patent onlycreated a part of the profits, he is onlyentitled to recover that part of the netgains.

Westinghouse Elec. & Mfg. Co. v. WagnerElec. & Mfg. Co., 225 U.S. 604, 614–15, 32S.Ct. 691, 56 L.Ed. 1222 (1912).

Translating the Court’s early stylisticdescription into a precise, contemporary,economic paradigm presents a challenge.Notwithstanding this obstacle, the objec-tive of the Court’s concern has been two-fold: determining the correct (or at leastapproximately correct) value of the patent-ed invention, when it is but one part orfeature among many, and ascertainingwhat the parties would have agreed to inthe context of a patent license negotiation.Litigants must realize that the two objec-tives do not always meet at the sameprecise number. Furthermore, licensorsof patented technology often license aninvention for more or less than its true‘‘economic value.’’ Such is the inherentrisk in licensing intangible assets that mayhave no established market value.

The first flaw with any application of theentire market value rule in the presentcase is the lack of evidence demonstratingthe patented method of the Day patent asthe basis—or even a substantial basis—ofthe consumer demand for Outlook. Asexplained above, the only reasonable con-clusion supported by the evidence is thatthe infringing use of the date-picker tool inOutlook is but a very small component of amuch larger software program. The vastmajority of the features, when used, do notinfringe. The date-picker tool’s minor rolein the overall program is further confirmedwhen one considers the relative impor-tance of certain other features, e.g., e-mail.Consistent with this description of Out-look, Lucent did not carry its evidentiaryburden of proving that anyone purchasedOutlook because of the patented method.Indeed, Lucent’s damages expert concededthat there was no ‘‘evidence that anybodyanywhere at any time ever bought Out-look, be it an equipment manufacturer or


an individual consumer, TTT because it hada date picker.’’ J.A 07821–22. And whenwe consider the importance of the manyfeatures not covered by the Day patentcompared to the one infringing feature inOutlook, we can only arrive at the unmis-takable conclusion that the invention de-scribed in claim 19 of the Day patent is notthe reason consumers purchase Outlook.Thus, Lucent did not satisfy its burden ofproving the applicability of the entire mar-ket value rule.

As for Windows Mobile and MicrosoftMoney, a jury’s conclusion might possiblybe different. At this point in the litigation,we again need not decide these issues.Because the damages award based on theinfringing date-picker feature of Outlook isnot supported by substantial evidence andis contrary to the clear weight of the evi-dence, the damages award must be vacat-ed. When the case is remanded to thetrial court for further proceedings consis-tent with this opinion, it may be helpful toanalyze the three infringing software prod-ucts independently.

The second flaw with any application ofthe entire market value rule in this caselies in the approach adopted by Lucent’slicensing expert. He had first tried toapply the entire market value rule to thesale of the ‘‘infringing’’ computers loadedwith the software, opining that Microsoftand Lucent would have agreed to a 1%royalty based on the entire price of thecomputer containing Outlook. In re-sponse, Microsoft filed a motion in limineto exclude such testimony, which the dis-trict court granted. At trial, Lucent’s ex-pert changed his opinion, contending thatthe royalty base should be the price of thesoftware (and not the entire computer) butalso that the royalty rate should be in-creased to 8% (from 1%). This opinioncontrasted starkly to the rates he pro-posed for the other patents in suit, whichwere in the 1 % range. In choosing 8%,

he reasoned that, ‘‘in a typical situation, ifone applied a royalty to a smaller patentedportion in a computer as opposed to theentire computer using typically infringedpatents, 8–percent TTT of the fair marketvalue of the patented portion would equateto 1–percent of the fair market value of theentire computer.’’

What Lucent’s licensing expert proposedhere does not comport with the purpose ofdamages law or the entire market valuerule. Lucent’s expert tried to reach thedamages number he would have obtainedhad he used the price of the entire comput-er as a royalty base. Being precludedfrom using the computer as the royaltybase, he used the price of the software, butinflated the royalty rate accordingly. Thiscannot be an acceptable way to conduct ananalysis of what the parties would haveagreed to in the hypothetical licensing con-text. The approach of Lucent’s expertignores what the district court’s evidentia-ry ruling tried to accomplish. The districtcourt implicitly recognized that any dam-ages computation based on the value of theentire computer using common royaltyrates (e.g., 1–5%) would be excessive.

Furthermore, Lucent’s expert admittedthat there was no evidence that Microsofthad ever agreed to pay an 8% royalty onan analogous patent. See J.A. 07824 (‘‘Q:Did you find one license where Microsoftever agreed to pay an eight percent royal-ty on Outlook for a tiny little feature? A:I didn’t see any Microsoft licenses on Out-look, frankly.’’).

[37] Although our law states certainmandatory conditions for applying the en-tire market value rule, courts must never-theless be cognizant of a fundamental rela-tionship between the entire market valuerule and the calculation of a running royal-ty damages award. Simply put, the baseused in a running royalty calculation canalways be the value of the entire commer-


cial embodiment, as long as the magnitudeof the rate is within an acceptable range(as determined by the evidence). Indeed,‘‘[a]ll running royalties have at least twovariables: the royalty base and the royaltyrate.’’ Nimmer & Dodd, supra, at § 7:5.Microsoft surely would have little reasonto complain about the supposed applicationof the entire market value rule had thejury applied a royalty rate of 0.1% (insteadof 8%) to the market price of the infring-ing programs. Such a rate would havelikely yielded a damages award of lessthan Microsoft’s proposed $6.5 million.Thus, even when the patented invention isa small component of a much larger com-mercial product, awarding a reasonableroyalty based on either sale price or num-ber of units sold can be economically justi-fied. See, e.g., Kearns, 32 F.3d at 1544(awarding a reasonable royalty of 90 centsper vehicle that had the infringing inter-mittent windshield wipers, when the aver-age car price was approximately $4000 to$6000).

Some commentators suggest that theentire market value rule should have littlerole in reasonable royalty law. See, e.g.,Mark A. Lemley, Distinguishing LostProfits From Reasonable Royalties, 51Wm. & Mary L.Rev. (forthcoming 2009)(manuscript at 2), available at http:// pa-pers.ssrn.com/sol3/papers.cfm?ab-stract id=1133173 (suggesting that‘‘courts have distorted the reasonable roy-alty measure’’ by ‘‘importing inappositeconcepts like the ‘entire market value rule’in an effort to compensate patent ownerswhose real remedy probably should havebeen in the lost profits category’’); AmyLanders, Let the Games Begin: Incen-tives to Innovation in the New Economyof Intellectual Property Law, 46 SantaClara L.Rev. 307, 362 (2006) (‘‘The currentiterations of the entire market value ruleare inconsistent with the Patent Act’sstatutory language.’’). But such generalpropositions ignore the realities of patent

licensing and the flexibility needed intransferring intellectual property rights.The evidence of record in the present dis-pute illustrates the importance the entiremarket value may have in reasonable roy-alty cases. The license agreements admit-ted into evidence (without objection fromMicrosoft, we note) highlight how sophisti-cated parties routinely enter into licenseagreements that base the value of the pat-ented inventions as a percentage of thecommercial products’ sales price. Thereis nothing inherently wrong with using themarket value of the entire product, espe-cially when there is no established marketvalue for the infringing component or fea-ture, so long as the multiplier accounts forthe proportion of the base represented bythe infringing component or feature.

We note finally that several amici seem-ingly challenge the district court’s instruc-tion to the jury on the entire market valuerule. See Brief for Ten Amici CuriaeTechnology–Based Companies at 11–12(asserting that ‘‘the entire market valuerule has no place in a reasonable royaltycalculation’’); id. at 15 (‘‘Jurors arecharged with the entire market value rulebut are not given an apportionmentcharge. No Supreme Court authority jus-tifies such a one-sided charge.’’); id. at 25(‘‘The two errors detailed above justify areversal of the damages award in this caseand, assuming that the patents are validand infringed TTT, a remand of the case fora new trial on damages. For the remand,this Court should provide more specificguidance for reasonable royalty calcula-tions.’’). While the amicus brief is infor-mative, we need not address its assertionregarding jury instructions given or notgiven, for the simple reason that neitherparty at trial challenged any damages in-struction that was given nor proposed aninstruction and objected when it was notgiven.


V. Lucent’s Cross–Appeal

[38] Lucent cross-appeals the districtcourt’s summary judgment of non-infringe-ment of claims 1, 2, 6, 7, 10–12, 15, and 16of the Day patent. These claims are appa-ratus claims containing means-plus-func-tion elements not found in claims 19 and21. As Lucent concedes, it did not provideany analysis of the source code of theaccused programs. Lucent further did notidentify the algorithms used in the accusedproducts. Lucent’s evidence, as JudgeBrewster noted, did ‘‘nothing more thandemonstrate that the accused productsreach the same result; the evidence [did]not demonstrate circumstantially or other-wise anything about the steps used by theaccused products to arrive at the result.’’Under our precedent, Judge Brewster’sgrant of summary judgment was not erro-neous. See Aristocrat Techs. Austl. PtyLtd. v. Int’l Game Tech., 521 F.3d 1328,1338 (Fed.Cir.), cert. denied, ––– U.S.––––, 129 S.Ct. 754, 172 L.Ed.2d 727(2008).

CONCLUSION

For the foregoing reasons, we affirm thedistrict court’s denial of Microsoft’s JMOLmotion for non-infringement. We reversethe district court’s denial of Microsoft’sJMOL regarding the damages award, va-cate the award, and remand for a new trialon damages.

AFFIRMED IN PART, VACATED INPART, and REMANDED

COSTS

No costs.

,

AMGEN INC., Plaintiff–Cross Appellant,

v.

F. HOFFMANN–LA ROCHE LTD,Roche Diagnostics GMBH, and Hoff-mann–LA Roche Inc., Defendants–Ap-pellants.

Nos. 2009–1020, 2009–1096.

United States Court of Appeals,Federal Circuit.

Sept. 15, 2009.

Background: Owner of patents relating toproduction of erythropoietin (EPO) usingrecombinant deoxyribonucleic acid (DNA)technology filed declaratory judgment ac-tion alleging that competitor’s productwould infringe patents if imported intoUnited States. Competitor filed counter-claims asserting that patents were invalidand not infringed. Following entry of sum-mary judgment of no invalidity for obvi-ousness, 581 F.Supp.2d 160, and jury ver-dict in patentee’s favor, the United StatesDistrict Court for the District of Massa-chusetts, William G. Young, J., vacatedjury’s verdict that claim of one patent wasinfringed under doctrine of equivalents(DOE), but granted patentee declaratoryrelief and permanently enjoined competi-tor from marketing its product in UnitedStates. Parties filed cross-appeals.

Holdings: The Court of Appeals, Schall,Circuit Judge, held that:

(1) patents could not receive protection ofstatutory safe harbor provision;

(2) patents were not invalid for obvious-ness-type double patenting; and

(3) prior clinical study isolating EPO fromhuman urine did not anticipate patent;

(4) failure to instruct jury that it was pos-sible to anticipate product-by-processclaim even if product in prior art was

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