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Microsoft to Pay Up for Copying Anti-Theft Tech

(CN) - Microsoft used Uniloc's patented technology to block consumers from copying its software, the Federal Circuit ruled, reinstating a 2009 jury verdict that had been invalidated by a Rhode Island federal court.

In issuing the decision Tuesday, the Washington, D.C.-based appeals court also granted Microsoft a new trial on damages, saying the jury's original award of $388 million in damages was "was tainted by the use of a legally inadequate methodology."

The three-judge panel for the Federal Circuit, the court that presides over patent cases, held that the jury's April 2009 verdict against the Redmond, Wash.-based technology giant for patent infringement was supported by substantial evidence.

U.S. District Judge William Smith of Rhode Island had thrown out the decision in September 2010, setting the stage for the appeals court to act.

Uniloc, an Irvine, Calif. company, makes software that prevents people from "casual copying" of software on multiple computers, a practice that causes significant sales losses among commercial software manufacturers like Microsoft.

In a lawsuit filed in 2003, Uniloc charged that Microsoft's "product activation" system, which is used in Windows XP, Office XP and Office 2003 programs, infringed on several parts of a Uniloc software registration system patent. The Uniloc system relies on a series of algorithms both on the consumer's computer and at the software firm to create a "remote licensee unique ID."

Microsoft copied the technology rather than developing its own secure software-licensing system, Uniloc claimed.

The jury agreed, awarding Uniloc $388 million in damages. But the appeals court found that the figure had been tainted by Uniloc's reckless mention of $19 billion as a damages checkpoint - an estimate drawn from the entire revenue Microsoft gained from the products that used patented technology.

Entire revenue should not have been considered, however, since the registration patents were not the selling point for consumers who bought those programs, Judge Richard Linn wrote for the court.

"The disclosure that a company has made $19 billion dollars in revenue from an infringing product cannot help but skew the damages horizon for the jury, regardless of the contribution of the patented component to this revenue," Linn added.

The appellate judges echoed the district court's finding that "the $19 billion cat was never put back into the bag."

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