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March 10, 2010

i4i Review Redux

Microsoft has prevailed upon the CAFC to rehear, en banc, only the willfulness portion of its affirmation of the district court ruling in i4i v. Microsoft. In other words, the CAFC cut Microsoft a break, probably because the CAFC wants another bite at cleaning up the willfulness standard. A revised CAFC ruling was issued today that takes out the sentence: "Microsoft does not challenge the jury instructions on willfulness or the sufficiency of the evidence supporting the jury's willfulness finding," and adds a section on willfulness to its revised ruling.

i4i v. Microsoft (CAFC 2009-1504 revised, order) precedential

New section VI. Willfulness

We do not read Microsoft's opening brief as challenging the denial of Microsoft's post-verdict JMOL on willfulness. Although Microsoft did mention willfulness when disputing the propriety of the enhanced damages award, in substance this argument focused on the district court's rationale for awarding enhanced damages, not the jury's willfulness verdict. Whether the district court abused its discretion in weighing the Read factors is not the same question as whether there was a legally sufficient evidentiary basis for the jury's finding of willfulness. Fed. R. Civ. P. 50(a); compare Bryant v. Compass Group USA Inc., 413 F.3d 471, 475 (5th Cir. 2005), with Read, 970 F.2d at 821, 826-27. Whether Microsoft's infringement was willful is a question of fact. Cohesive Techs., Inc. v. Waters Corp., 543 F.3d 1351, 1374 (Fed. Cir. 2008); see Braun Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 822 (Fed. Cir. 1992). This question was submitted to the jury, which answered in the affirmative. Accordingly, appellate review is limited to asking whether that verdict is supported by substantial evidence. ACCO Brands, 501 F.3d at 1311-12. On appeal, Microsoft has never attacked the jury instructions or the basis for the jury's willfulness verdict. In light of what Microsoft actually argued, we do not read Microsoft's passing reference to its post-verdict JMOL on willfulness as raising the issue.

Even if we were to read the solitary sentence, "Microsoft is entitled to judgment as a matter of law on the issue of willfulness," as challenging the jury's finding of willfulness, the result does not change. A reasonable jury could have concluded that Microsoft "willfully" infringed the '449 patent based on the evidence presented at trial. Infringement is willful when the infringer was aware of the asserted patent, but nonetheless "acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." Seagate, 497 F.3d at 1371. After satisfying this objective prong, the patentee must also show that the infringer knew or should have known of this objectively high risk. Id.

In this case, i4i presented sufficient evidence at trial to prove each prong of the Seagate standard for willfulness. The jury heard that Microsoft employees attended demonstrations of i4i's software, which practiced the '449 patent. Further, the jury learned that Microsoft employees received i4i's sales kit, which identified i4i's software as "patented" technology and cited the '449 patent. The jury then saw a series of emails between Microsoft employees discussing a marketing email sent by i4i. One of those emails explained that the "heart" of i4i's software was patented, again citing the '449 patent. Based on this circumstantial evidence, the jury could have reasonably inferred that Microsoft knew about the '449 patent.

At trial, i4i also showed that Word's custom XML editor was designed to and did perform the same methods as i4i's software (which was known to practice the '449 patent). Despite this highly similar functionality, there is no evidence Microsoft took any remedial action, even though Microsoft knew of the '449 patent as early as April 2001, before any work had begun on Word's custom XML editor. For example, Microsoft did not cease its infringing activity or attempt to design around; instead, Microsoft started marketing, selling, and instructing others in the use of Microsoft's custom XML editor in 2002. Cf. DePuy Spine, Inc. v. Medtronic Sofamor Danek, 567 F.3d 1314, 1336-37 (Fed. Cir. 2009). Similarly, there is no evidence Microsoft ever made a good faith effort to avoid infringement; internal emails show Microsoft intended to render i4i's product "obsolete" and assure "there won't be a need for [i4i's] product." Based on this and other evidence presented at trial, it would have been reasonable for the jury to infer that Microsoft went ahead with producing, marketing, and promoting its custom XML editor despite an objectively high likelihood the editor infringed the '449 patent. This same evidence supports the jury's finding as to the subjective prong of Seagate. Given the information Microsoft had about i4i's software and the '449 patent, Microsoft knew or should have known that there was an objectively high risk of infringement.

The fact that Microsoft presented several defenses at trial, including noninfringement and invalidity, does not mean the jury's willfulness finding lacks a sufficient evidentiary basis. See Fed. R. Civ. P. 50(a). The jury heard all of Microsoft's defenses, which it expressly rejected in finding the '449 patent infringed and not invalid. Cf. DePuy Spine, 567 F.3d at 1336-37 (noting that the question of equivalence was "a close one"). Based on its own assessment of the evidence and Microsoft's defenses, the jury was free to decide for itself whether Microsoft reasonably believed there were any substantial defenses to a claim of infringement. Cf. Cohesive Techs., 543 F.3d at 1374.

Here is the December 22, 2009 blog entry (the first CAFC ruling): Unpreserved.

Posted by Patent Hawk at March 10, 2010 5:54 PM | Infringement

Comments

En banc says "no" to Microsoft.

Posted by: anon at April 2, 2010 3:33 AM