Court must reconsider Microsoft patent infringement damages

Out-Law News | 28 Feb 2008 | 12:00 pm | 2 min. read

A US appeals court has ordered a reconsideration of the damages that Microsoft must pay to a Guatemalan inventor who successfully sued it for patent infringement.

Carlos Armando Amado won a case in 2006 against the software giant. The court accepted that Microsoft had infringed a patent he held for software that connects Microsoft's Excel software with a database.

Amado had been awarded four cents for every copy of the software sold, but on appeal that was increased to 12 cents per copy. Amado asked for $2 per copy.

The US Court of Appeals for the Federal Circuit has now said the 12 cents damages awarded by the District Court in the first appeal must be reconsidered. The Court expressed no view as to what the damages should be, but said that the 12 cents figure had not been justified by the lower Court.

Both Microsoft and Amado had appealed, Microsoft demanding a return to the 4 cents royalty rate, Amado seeking $2 per copy of the software sold.

The four cents rate had been applied to Microsoft's activity before the original court judgment against it. The dispute is now over what royalty should be paid for copies sold after the verdict, when Microsoft knew that it was deemed to be infringing Amado's patent.

Microsoft was given the Court's permission to continue to sell its software on condition of paying a Court-set royalty.

"The jury’s award of $0.04 per unit was based on Microsoft’s infringing conduct that took place prior to the verdict," said Circiut Judge Linn in the ruling. "There is a fundamental difference, however, between a reasonable royalty for pre-verdict infringement and damages for post-verdict infringement."

"Prior to judgment, liability for infringement, as well as the validity of the patent, is uncertain, and damages are determined in the context of that uncertainty. Once a judgment of validity and infringement has been entered, however, the calculus is markedly different because different economic factors are involved," said the ruling.

The Court of Appeals said that it could not judge whether or not the District Court had properly exercised its discretion because it had not explained why it awarded royalties of 12 cents.

It asked the District Court to reconsider what the correct royalty should be.

Inventor Amado said in earlier court hearings that he had developed the application in 1990 and approached Microsoft in 1992, when the company declined to buy his program. Amado went on to patent the software.

He claimed that a year later Microsoft came out with a very similar application in its 1995 Office software programs. Amado sued in 2003, claiming around $500 million in damages for 10 claims. Only one was upheld, though, and he was awarded $8.96m in damages for software sold up to the resolution of the court case.

The current argument surrounds royalties for software sold since then.