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Case No. 07-CV-2000-H (CAB)
David A. Hahn (SBN 125784)
HAHN & ADEMA
501 West Broadway, Suite 1600
San Diego, CA 92101-3595
Telephone: (619) 235-2100
Facsimile: (619) 235-2101
Attorney for Lucent Technologies Inc.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
LUCENT TECHNOLOGIES INC. and
MULTIMEDIA PATENT TRUST,
Plaintiffs and Counterclaim-defendants,
v.
MICROSOFT CORPORATION,
Intervenor and Counter-claimant,
Case No. 07-CV-2000 H (CAB)
consisting of matters severed from consolidated
cases:
02-CV-2060 B (CAB)
03-CV-0699 B (CAB)
03-CV-1108 B (CAB)
LUCENT'S MEMORANDUM OF POINTS
AND AUTHORITIES IN OPPOSITION TO
MICROSOFT'S COMBINED MOTIONS
FOR JUDGMENT AS A MATTER OF
LAW, NEW TRIAL, OR REMITTITUR
Date: June 13, 2008
Courtroom: 13
Judge: Honorable Marilyn L. Huff
MICROSOFT CORPORATION,
Plaintiff and Counter-defendant,
v.
LUCENT TECHNOLOGIES INC.,
Defendant and Counter-claimant,
LUCENT TECHNOLOGIES INC. and
MULTIMEDIA PATENT TRUST,
Plaintiffs,
v.
DELL, INC.,
Defendant.
Case 3:07-cv-02000-H-CAB Document 809 Filed 05/19/2008 Page 1 of 60
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Case No. 07-CV-2000-H (CAB)
TABLE OF CONTENTS
Page
I. INTRODUCTION .....................................................................................................................1
II. LEGAL STANDARDS .............................................................................................................1
A. Judgment as a Matter of Law.........................................................................................1
B. New Trial .......................................................................................................................1
III. THE '356 PATENT: VALIDITY AND INFRINGEMENT.....................................................2
A. The Jury Reasonably Found that Defendants Failed to Prove that Claims 19
and 21 of the '356 Patent are Invalid..............................................................................2
1. The Jury Was Entitled to Disregard the Uncorroborated Testimony of
Microsoft's Paid Fact Witness Regarding the FXFE System ............................3
2. Substantial Evidence Exists that FXFE Was Not Publicly Used Under
§§ 102(b) or 102(g), and Was Therefore Not Prior Art. ....................................4
3. The Jury Was Reasonably Entitled to Find that the FXFE System Did
Not Anticipate Claim 19. ...................................................................................5
a. The Jury Was Reasonably Entitled to Find that the FXFE
System Did Not Meet the "indicating" Step ..........................................6
b. The Jury Was Reasonably Entitled to Find that the FXFE
System Did Not Meet the "inserting" Step or Have "information
fields" .....................................................................................................7
c. The Jury Was Reasonably Entitled to Find that the FXFE
System Did Not Have "graphical" Tools ..............................................7
d. The Jury Was Reasonably Entitled to Find that the FXFE
System Did Not Meet the Step of "concurrently displaying"................8
4. The Jury Was Reasonably Entitled to Find that Neither the FXFE
System Nor the Datamation Article Rendered Obvious Claim 19 or 21
of the '356 Patent................................................................................................9
5. The Jury Reasonably Found that YMM Did Not Render Obvious Claim
19......................................................................................................................10
a. The Jury Was Reasonably Entitled to Find that YMM did Not
Have "display keys" or Allow for "pointing to the display keys" ........10
b. The Jury Was Reasonably Entitled to Find that YMM did Not
Have "graphical" tools ........................................................................11
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ii Case No. 07-CV-2000-H (CAB)
c. The Jury Was Reasonably Entitled to Find that YMM Did Not
Render Claim 19 Obvious....................................................................11
B. Lucent Presented Substantial Evidence From Which the Jury Reasonably
Concluded that Microsoft Infringes the '356 Patent. ...................................................12
1. Lucent Presented Substantial Evidence that Microsoft Outlook Includes
a Composition Tool..........................................................................................13
2. Lucent Presented Substantial Evidence that Windows Mobile Includes
a Composition Tool..........................................................................................14
3. Lucent Has Shown Specific Acts of Direct Infringement. ..............................15
4. Lucent Presented Substantial Evidence of Contributory Infringement. ..........16
a. Lucent Presented Substantial Evidence that Microsoft
Contributes to Infringement by Supplying Microsoft Outlook............18
b. Lucent Presented Substantial Evidence that Microsoft
Contributes to Infringement by Supplying Microsoft Money and
Windows Mobile..................................................................................19
c. Software is a Component, Material, or Apparatus Under 35
U.S.C. § 271(c). ...................................................................................19
5. Lucent Presented Substantial Evidence of Microsoft's Intent to Induce
Infringement of the '356 Patent........................................................................20
a. Microsoft Intends for Money to be Used in an Infringing
Manner. ................................................................................................22
b. Microsoft Intends for Outlook to be Used in an Infringing
Manner. ................................................................................................24
c. Microsoft Intends for Windows Mobile to be Used in an
Infringing Manner................................................................................25
6. The Jury's Verdicts Regarding Infringement by Microsoft and Dell are
Not Inconsistent and Microsoft is Not Entitled to a New Trial. ......................27
C. This Court Properly Construed the Claims of the '356 Patent and Microsoft is
Not Entitled to a New Trial..........................................................................................27
D. This Court's Jury Instructions on Induced and Contributory Infringement Were
Correct and Microsoft is Not Entitled to a New Trial. ................................................28
1. This Court's Jury Instructions Contributory Infringement Were Correct. .......28
2. This Court's Jury Instructions on Induced Infringement Were Correct...........29
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IV. THE '295 PATENT: INFRINGEMENT.................................................................................30
A. Lucent Presented Substantial Evidence that Windows XP Tablet PC Compares
a Tap to a Predefined Shape.........................................................................................30
B. Lucent Presented Substantial Evidence that Microsoft Induced and Contributed
to the Infringement of Claim 1 of the '295 Patent........................................................31
1. Lucent Presented Substantial Evidence That Microsoft Induced
Infringement.....................................................................................................31
2. Lucent Presented Substantial Evidence That Microsoft Contributed to
Infringement.....................................................................................................32
C. This Court's Jury Instruction on Means-Plus-Function Infringement was
Correct and Microsoft is Not Entitled to a New Trial. ................................................34
D. Mr. Ward Did Not Testify Beyond His Expert Report and Microsoft is Not
Entitled to a New Trial.................................................................................................35
E. Microsoft is Not Entitled to a New Trial Based On This Court's Claim
Construction.................................................................................................................36
V. SUBSTANTIAL EVIDENCE SUPPORTS THE JURY'S LUMP-SUM DAMAGES
AWARDS. ...............................................................................................................................38
A. Substantial Evidence Supports the Jury's Damages Verdict........................................38
B. The Entire Market Value Rule Does Not Justify Granting JMOL or New Trial
on the Jury's Damages Verdict.....................................................................................42
1. The Entire Market Value is Not Applicable in This Case. ..............................42
2. Even Under Proper Application of the Entire Market Value Rule,
Substantial Evidence Supports Use of the Accused Software and
Computer System as the Royalty Base. ...........................................................45
C. Damages for the '356 Patent Should Not Be Limited to the Extent to Which
Lucent has Demonstrated Specific Instances of Infringement. ...................................47
D. A Jury Award Based On an 8% Royalty for the '356 Patent is Supported by the
Evidence.......................................................................................................................49
E. The Size of the Jury's Award for the '356 Patent is Not "Grossly Excessive"
Warranting Judgment as a Matter of Law, a New Trial or a Remittitur. .....................50
VI. CONCLUSION........................................................................................................................50
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Case No. 07-CV-2000-H (CAB)
TABLE OF AUTHORITIES
Page
CASES
Acco Brands, Inc. v. ABA Locks Mfr. Co.,
501 F.3d 1307 (Fed. Cir. 2007)................................................................................................16
Al-Site Corp. v. VSI Int'l, Inc.,
174 F.3d 1308 n.2 (Fed. Cir. 1999)..........................................................................................34
American Seating Co. v. USSC Group, Inc.,
2005 WL 1224603, *5-6 ............................................................................................................5
Arthrocare Corp. v. Smith & Nephew, Inc.,
406 F.3d 1365 (Fed. Cir. 2005)................................................................................................15
Atmel Corp. v. Information Storage Devices,
198 F.3d 1374 (Fed. Cir. 1999)..........................................................................................36, 37
Bernhardt, L.L.C. v. Collezione Europa USA, Inc.,
386 F.3d 1371 (Fed. Cir. 2004)..................................................................................................5
BJ Servs. Co. v. Halliburten Energy Servs., Inc.,
338 F.3d 1368 (Fed. Cir. 2003)..................................................................................................3
Black & Decker v. Bosch,
2006 WL 3883286, at *3 (N.D. Ill. Dec. 18, 2006) .................................................................47
Bose Corp. v. JBL Inc.,
274 F.3d 1354 (Fed. Cir. 2001)................................................................................................46
Brooktree Corp. v. Advanced Micro Devices, Inc.,
977 F.2d 1555 (Fed. Cir. 1992)................................................................................................39
Budde v. Harley Davidson,
250 F.3d 1369 (Fed. Cir. 2001)................................................................................................37
Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc.,
418 F. Supp. 2d 1021 (S.D. Ind. 2006) ....................................................................................48
Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc.,
145 F.3d 1303 (Fed. Cir. 1998)....................................................................................22, 35, 47
Construction Tech., Inc. v. Cybermation, Inc.,
965 F. Supp. 416 (S.D.N.Y. 1997)...........................................................................................20
Corning Inc. v. SRU Biosystems,
400 F. Supp. 2d 653 (D. Del. 2005).........................................................................................21
Creo Prods., Inc. v. Presstek, Inc.,
305 F.3d 1337 (Fed. Cir. 2002)..........................................................................................37, 38
Cross Medical Prods. v. Medtronic Sofamor Danek, Inc.,
424 F.3d 1293 (Fed. Cir. 2005)................................................................................................22
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v Case No. 07-CV-2000-H (CAB)
Default Proof Credit Card Sys.,
412 F.3d 1291 (Fed. Cir. 2005)................................................................................................37
Dennison Manufacturing Co. v. Ben Clements and Sons, Inc.,
467 F. Supp. 391 (S.D.N.Y. 1979)...........................................................................................22
DSU Medical Corp. v. JMS Co.,
471 F.3d 1293 (Fed. Cir. 2006)..........................................................................................20, 29
Eli Lilly and Co. v. Barr Lab., Inc.,
251 F.3d 955 (Fed. Cir. 2001)....................................................................................................6
Eolas Techs. Inc. v. Microsoft Corp.,
No. 99 C 0626, 2004 WL 170334, at *2..................................................................................44
Eolas Techs., Inc. v. Microsoft Corp.,
399 F.3d 1325 (Fed. Cir. 2005)................................................................................................20
E-Pass Techs., Inc. v. 3Com Corp.,
473 F.3d 1213 (Fed. Cir. 2007)..........................................................................................16, 21
Finisair Corp. v. DirecTV Group, Inc.,
Nos. 2007-1023, 2007-1024, 2008 WL 1757675 (Fed. Cir. Apr. 18, 2008) ...........................10
Finnegan Corp. v. Int'l Trade Com'n,
180 F.3d 1354 (Fed. Cir. 1999)..................................................................................................4
Fuji Photo Film Co., Ltd. v. Jazz Photo Corp.,
394 F.3d 1368 (Fed. Cir. 2005)................................................................................................39
Georgia-Pacific Corp. v. United States Plywood Corp.,
318 F. Supp. 1116 (S.D.N.Y. 1970).........................................................................................42
Golden Blount, Inc. v. Robert H. Peterson Co.,
438 F.3d 1354 (Fed. Cir. 2006)..........................................................................................15, 16
Graham v. John Deere Co.,
383 U.S. 1 (1966).....................................................................................................................10
Hanson v. Alpine Valley Ski Area, Inc.,
718 F.2d 1075 (Fed. Cir. 1983)................................................................................................45
Harrington Mfg. Co. v. Powell Mfg. Co.,
815 F.2d 1478 (Fed. Cir. 1986)..................................................................................................5
Hilgraeve Corp. v. Symantec Corp.,
265 F.3d 1336 (Fed. Cir. 2001)................................................................................................22
Hilgraeve, Inc. v. Symantec Corp.,
272 F. Supp. 2d 613 (E.D. Mich. 2003)...................................................................................47
Hodosh v. Block Drug Co.,
833 F.2d 1575 (Fed. Cir. 1987), cert denied, 485 U.S. 1007 (1988).......................................18
Imagexpo, L.L.C. v. Microsoft Corp.,
284 F. Supp. 2d 365 (E.D. Va. 2003) ......................................................................................29
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Imonex Services, Inc. v. W. H. Munzprufer Dietmar Trenner GMBH,
408 F.3d 1374 (Fed. Cir. 2005)................................................................................................45
In re Dossel,
115 F.3d 942 (Fed. Cir. 1997)..................................................................................................37
In re Wertheim,
646 F.2d 527 (CCPA 1981) ......................................................................................................4
Intel Corp. v. Via Techs., Inc.,
319 F.3d 1357 (Fed. Cir. 2003)................................................................................................37
Interactive Pictures Corp. v. Infinite Pictures Corp.,
274 F.3d 1371 (Fed. Cir. 2001)................................................................................................45
Jenkins v. Union Pac. R. Co.,
22 F.3d 206, 210 (9th Cir. 1994) ...............................................................................................2
Johnson v. Paradise Valley Unified Sch. Dist.,
251 F.3d 1222 (9th Cir. 2001) ...................................................................................................1
Juicy Whip, Inc. v. Orange Bang, Inc.,
292 F.3d 7283 (Fed. Cir. 2002)..................................................................................................4
Kemco Sales, Inc. v. Control Papers Co.,
208 F.3d 1352 (Fed. Cir. 2000)................................................................................................35
KSR Intern. Co. v. Teleflex Inc.,
127 S.Ct. 1727 (2007)..............................................................................................................10
LaLonde v. County of Riverside,
204 F.3d 947 (9th Cir. 2000) .....................................................................................................1
Lewmar Marine, Inc. v. Barient, Inc.,
827 F.2d 744 (Fed. Cir. 1987)....................................................................................................6
Linear Technology Corp. v. Impala Linear Corp.,
379 F.3d 1311 (Fed. Cir. 2004)................................................................................................21
Liquid Dynamics Corp. v. Vaughan Co., Inc.,
449 F.3d 1209 (Fed. Cir. 2006)................................................................................................22
Lucent Techs. Inc. v. Gateway, Inc.,
509 F. Supp. 2d 912 (S.D. Cal. 2007)......................................................................................17
Lucent Techs. Inc. v. Gateway, Inc.,
537 F. Supp. 2d 1095 ...............................................................................................4, 18, 20, 29
Lucent Techs. Inc. v. Microsoft Corp.,
Case No. 06-CV-0684-H (CAB)..............................................................................................46
Lummus Indus., Inc. v. D.M. & E. Corp.,
862 F.2d 267 (Fed. Cir. 1988)..................................................................................................28
Markman v. Westview Instruments, Inc.,
52 F.3d 967 (Fed. Cir. 1995)....................................................................................................31
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MGM Studios Inc. v. Grokster, Ltd.,
545 U.S. 913 (2005).................................................................................................................21
Micro Chem., Inc. v. Lextron, Inc.,
317 F.3d 1387 (Fed. Cir. 2003)................................................................................................38
Microsoft Corp. v. AT&T Corp.,
- U.S - , 127 S. Ct. 1746 (U.S. 2007) .......................................................................................20
Moleculon Research Corp. v. CBS, Inc.,
793 F.2d 1261 (Fed. Cir. 1986)....................................................................................15, 16, 21
Monsanto Co. v. Ralph,
382 F.3d 1374 (Fed. Cir. 2004)................................................................................................38
Motionless Keyboard Co. v. Microsoft Corp.,
486 F.3d 1376 (Fed. Cir. 2007)..................................................................................................5
National Instruments Corp. v. The Mathworks, Inc.,
113 F. App'x 895 (Fed. Cir. 2004).....................................................................................21, 22
Oak Indus., Inc. v. Zenith Elec. Corp.,
697 F. Supp. 988 (N.D. Ill. 1988) ............................................................................................29
Pavao v. Pagay,
307 F.3d 915 (9th Cir. 2002) .....................................................................................................1
Philips Elecs. N. Am. Corp. v. Contec Corp,
411 F. Supp. 2d 470 (D. Del. 2006).........................................................................................48
Philips Elecs. N. Am. Corp. v. Contec Corp.,
177 F. App'x 981 (Fed. Cir. 2006).....................................................................................47, 48
Philips Elecs. N. Am. Corp. v. Contrec Corp.,
411 F. Supp. 2d 470 (D. Del. 2006).............................................................................17, 18, 29
Pickholtz v. Rainbow Techs., Inc.,
260 F. Supp. 2d 980 (N.D. Cal. 2003) .....................................................................................20
Pierce v. Multnomah Cty.,
76 F.3d 1032 (9th Cir.1996) ......................................................................................................1
PPG Indus. v. Guardian Indus.,
156 F.3d 1351 (Fed. Cir. 1998)..................................................................................................8
Reeves v. Sanderson Plumbing Prods., Inc.,
530 U.S. 133 (2000)...................................................................................................................1
S3 Inc. v. nVIDIA,
259 F.3d 1364 (Fed. Cir. 2001)................................................................................................37
Slimfold Mfg. Co. v. Kinkead Indus., Inc.,
932 F.2d 1453 (Fed. Cir. 1991)...............................................................................................44
SmithKline Diagnostics, Inc. v. Helena Labs. Corp.,
926 F.2d 1161 (Fed. Cir. 1991)................................................................................................39
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Snellman v. Ricoh Co., Ltd.,
862 F.2d 283 (Fed. Cir. 1988)..................................................................................................45
State Indus., Inc. v. Mor-Flo Indus., Inc.,
883 F.2d 1573 (Fed. Cir. 1989)................................................................................................43
Symantec Corp. v. Computer Asssociates Int'l, Inc.,
2008 WL 1012443 (Fed. Cir. Apr. 11, 2008) ....................................................................16, 47
Tec Air, Inc. v. Denso Mfg. Mich. Inc.,
192 F.3d 1353 (Fed. Cir. 1999)................................................................................................46
Techs., Inc. v. 3Com Corp.,
473 F.3d 1213 (Fed. Cir. 2007)................................................................................................21
Texas Digital Sys., Inc. v. Telegenix, Inc.,
308 F.3d 1193 (Fed. Cir. 2002)..................................................................................................4
Toner for Toner v. Lederle Labs.,
828 F.2d 510 (9th Cir. 1987) ...................................................................................................27
TypeRight Keyboard Corp. v. Microsoft Corp.,
374 F.3d 115 (Fed. Cir. 2004)....................................................................................................4
United States v. Real Property Located at 20832 Big Rock Drive, Malibu,
51 F.3d 1402 (9th Cir. 1995) ...................................................................................................28
Weinar v. Rollform Inc.,
744 F.2d 797 (Fed. Cir. 1984)....................................................................................................2
Woodland Trust v. Flowertree Nursery Inc.,
148 F.3d 1368 (Fed. Cir. 1998)..............................................................................................4, 5
Zenith Radio Corp. v. Hazeltine Research, Inc.,
395 U.S. 100 (1969).................................................................................................................45
STATUTES
35 U.S.C. § 271(c) .............................................................................................................17, 19, 20, 34
35 U.S.C. § 271(d)(1) ..........................................................................................................................18
35 U.S.C. § 271(f)..........................................................................................................................19, 20
OTHER AUTHORITIES
Wright & Miller, Federal Practice and Procedure § 2505 ...................................................................28
RULES
Fed. R. Civ. P. 50(a)(1)..........................................................................................................................1
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I. INTRODUCTION
After 19 days of trial held over more than five weeks, and after several days of deliberation,
the jury in this case returned a verdict holding Microsoft liable for infringing the asserted claims of
Lucent's '356 and '295 patents, finding those claims valid, and awarding appropriate damages.
Microsoft now asks this Court to set aside that verdict because it does not like the result. But the
jury's verdict regarding the '356 and '295 patents is fully supported by the trial record and comports
with the clear weight of the evidence and the controlling law. Accordingly, no basis exists for
judgment as a matter of law, new trial, or remittitur, and Microsoft's motions should be denied.
II. LEGAL STANDARDS
A. Judgment as a Matter of Law
The Court may grant judgment as a matter of law only where "a party has been fully heard on
an issue during a jury trial and the court finds that a reasonable jury would not have a legally
sufficient evidentiary basis to find for the party on that issue." Fed. R. Civ. P. 50(a)(1). The Court
plays a "limited role in reviewing a jury's factual findings." Johnson v. Paradise Valley Unified Sch.
Dist., 251 F.3d 1222, 1227 (9th Cir. 2001). JMOL is not appropriate except on the rarest occasions
when "the evidence permits only one reasonable conclusion." See, e.g., LaLonde v. County of
Riverside, 204 F.3d 947, 959 (9th Cir. 2000). "A jury's verdict must be upheld if it is supported by
substantial evidence, which is evidence adequate to support the jury's conclusion, even if it is also
possible to draw a contrary conclusion." Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002). In
ruling on a motion for JMOL, the court is not to make credibility determinations or weigh evidence,
and should "draw all reasonable inferences in favor of the nonmoving party." Reeves v. Sanderson
Plumbing Prods., Inc., 530 U.S. 133, 150 (2000). The Court "must disregard all evidence favorable
to the moving party that the jury is not required to believe." Id. at 151. "If conflicting inferences
may be drawn from the facts," then JMOL is not appropriate. See, e.g., Pierce v. Multnomah County,
76 F.3d 1032, 1037 (9th Cir. 1996) (internal quotations omitted).
B. New Trial
"A trial court may grant a new trial only if the verdict is against the clear weight of the
evidence, and may not grant it simply because the court would have arrived at a different verdict."
Pavao, 307 F.3d at 918. Further, "an error in jury instructions does not require reversal if it is more
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probable than not that the error was harmless." Jenkins v. Union Pac. R. Co., 22 F.3d 206, 210 (9th
Cir. 1994). An error is harmless unless it "prejudicially affected the verdict." Weinar v. Rollform
Inc., 744 F.2d 797, 808 (Fed. Cir. 1984).
III. THE '356 PATENT: VALIDITY AND INFRINGEMENT
A. The Jury Reasonably Found that Defendants Failed to Prove that Claims 19 and
21 of the '356 Patent are Invalid.
The trial record fully supports several different and independent bases by which the jury was
reasonably entitled to find the '356 patent not invalid. As an initial matter, Microsoft
mischaracterizes the nature of the evidence regarding the purported Foreign Exchange Front End
("FXFE") system. Microsoft presented virtually no evidence about the FXFE system—no device; no
technical documentation; no software code. See infra Section III.A.1. The only evidence presented
by Microsoft about the FXFE system was the testimony of its paid fact witness, which was
uncorroborated with respect to several critical issues. Id. On this failure of evidence alone, the jury
was entitled to disregard the FXFE system as an invalidating reference. Id. Lucent also presented
substantial evidence negating defendants' claim that the FXFE system was publicly used in the
United States. See infra Section III.A.2. On this basis, the jury was reasonably entitled to find that
the FXFE system did not constitute prior art for purposes of anticipation or obviousness. Id.
Microsoft also mischaracterizes the nature of the FXFE system and the timeline with respect
to the invention of the '356 patent and the alleged prior art FXFE system. (MB at 3) AT&T's Slate
project, which led to the invention of the '356 patent, began in 1983, before the development of the
FXFE system. See infra Section III.A.3. The FXFE system (to the extent it could be understood
from the limited evidence) was a system that did not include many of the inventive aspects of the '356
patent claims. Id. In this context, Lucent presented substantial evidence that the FXFE system was
missing several critical limitations, and the jury was therefore reasonably entitled to conclude that the
FXFE system did not anticipate or render obvious the asserted claims of the '356 patent. Id.
With respect to the Datamation Article, Microsoft concedes that it does not disclose at least
the "indicating" limitation. (MB at 9) And contrary to Microsoft's assertions that this was the only
missing step, the record contains substantial evidence that the Datamation Article does not disclose
other critical limitations (see infra Section III.A.3) and that the invention of the '356 patent was not
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obvious in light of the Datamation Article. See infra Section III.A.4. Thus, the jury was reasonably
entitled to conclude that the Datamation Article did not render obvious the asserted claims. Id.
Finally, regarding J.K. Lasser's Your Money Manager ("YMM") software program, Microsoft
admits that it does not disclose a "composition tool." (MB at 12) Substantial evidence exists that
YMM does not disclose other critical limitations, and that the invention of the '356 patent was not
obvious in light of YMM. See infra Section III.A.5. Thus, the jury was reasonably entitled to
conclude that YMM did not render obvious the asserted claims of the '356 patent. Id.
1. The Jury Was Entitled to Disregard the Uncorroborated Testimony of
Microsoft's Paid Fact Witness Regarding the FXFE System
Microsoft's evidence regarding the so-called FXFE system was virtually non-existent.
Indeed, Microsoft failed to present the FXFE system in any form (working or non-working) or any
technical documentation whatsoever regarding the operation of the alleged FXFE system. It is
undisputed that neither Microsoft's expert nor Lucent's expert was ever able to inspect, review, use, or
test any FXFE system. (3/18/08 Tr. at 195:8-19, 197:24-199:4; 3/26/08 Tr. at 110:18-111:11)1 The
entirety of Microsoft's evidence with respect to the FXFE system was based on a short,
general-purpose, non-technical magazine article ("the Datamation Article") about an incomplete,
experimental prototype version of an "Easel" system (the article never mentions "Foreign Exchange
Front End") and the uncorroborated and scripted testimony of defendants' paid fact witness,
Mr. Long, who was recalling events from more than 20 years ago. (3/18/08 Tr. at 185:12-195:19;
3/19/08 Tr. at 13:3-12; see also DX AOD; PX 1728) Microsoft relied almost exclusively on
Mr. Long's uncorroborated testimony to supposedly fill in many missing gaps about missing claim
limitations and how the purported FXFE system worked. (3/18/08 Tr. at 183:6-185:15; PX 1728)
Microsoft's failure of evidence in this regard is critical in the context of determining patent
validity, despite its suggestion to the contrary (MB at 9 n.4), as such uncorroborated testimony is
insufficient to find invalidity.2 In this context, the jury was certainly entitled to weigh the credibility,
1 All exhibits refer to the exhibits to the Declaration of Elizabeth T. Bernard filed concurrently
herewith.
2 See BJ Servs. Co. v. Halliburten Energy Servs., Inc., 338 F.3d 1368, 1373 (Fed. Cir. 2003)
("Uncorroborated testimony alone cannot constitute clear and convincing proof."); Texas Digital Sys.,
(Continued…)
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memory, and bias of Mr. Long, disregard his uncorroborated testimony regarding several critical
elements, and reasonably determine that Microsoft had failed to present clear and convincing
evidence that the FXFE system met each and every limitation of claim 19 of the '356 patent. Id.
2. Substantial Evidence Exists that FXFE Was Not Publicly Used Under
§§ 102(b) or 102(g), and Was Therefore Not Prior Art.
It is undisputed that the FXFE system can neither anticipate nor serve as prior art for purposes
of an obviousness analysis if it was not publicly used in the United States under §§ 102(b) or 102(g).3
Substantial evidence exists that FXFE was not publicly used in the United States, and the jury was
therefore reasonably entitled to determine that the FXFE system was not prior art and could not
invalidate the asserted claims of the '356 patent.
It is undisputed that the FXFE system was developed entirely in the United Kingdom.
(3/18/08 Tr. at 201:4-6; 3/19/08 Tr. at 11:2-5; 3/26/08 Tr. at 111:12-14) Thus, to satisfy the public
Inc. v. Telegenix, Inc., 308 F.3d 1193, 1217 (Fed. Cir. 2002) ("[C]orroboration is required of any
witness whose testimony alone is asserted to invalidate a patent, regardless of his or her level of
interest."); Juicy Whip, Inc. v. Orange Bang, Inc., 292 F.3d 728, 737-43 (Fed. Cir. 2002) ("Witnesses
whose memories are prodded by the eagerness of interested parties to elicit testimony favorable to
themselves are not usually to be depended upon for accurate information."); Finnegan Corp. v. Int'l
Trade Com'n, 180 F.3d 1354, 1366-70 (Fed. Cir. 1999) ("Mere testimony concerning invalidating
activities is received with further skepticism because such activities are normally documented by
tangible evidence such as devices."); see also TypeRight Keyboard Corp. v. Microsoft Corp., 374
F.3d 1151, 1157-1160 (Fed. Cir. 2004) (the jury is entitled to weigh the credibility and reject or
"discredit the testimony" of paid fact witnesses, including one "who testified as fact witnesses [and]
received compensation from Microsoft" and who testified about alleged prior art from "over 18 years
ago")).
Nor can two paragraphs from the Datamation Article (an article that does not even mention "Foreign
Exchange Front End") serve to corroborate Mr. Long's testimony regarding the limitations that
Microsoft contends were not missing from the article, as "that article is ambiguous at best."
Finnigan, 180 F.3d at 1369-70.
3 Section 102(b) requires public use of the invention in the United States. See Woodland Trust v.
Flowertree Nursery Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998) (In order to invalidate a patent based
on prior knowledge or use, that knowledge or use must have been "accessible to the public.").
Section 102(g) requires that the invention was "made in this country by another inventor who had not
abandoned, suppressed, or concealed it." There is no dispute in this case that the experimental
prototype version of FXFE was abandoned. (3/18/08 Tr. at 204:22-205:25; 3/26/08 Tr. at
112:19-22). Moreover, because the FXFE system is not prior art under Section 102, it cannot be
considered as part of an obviousness analysis under Section 103. See, e.g., Lucent Techs. Inc. v.
Gateway, Inc., 537 F. Supp. 2d 1095, 1110 n.4 (S.D. Cal. Jan. 17, 2008) ("Prior art for section 103
purposes" is generally established by "the prior art named in section 102.") (citing In re Wertheim,
646 F.2d 527, 523-33 (CCPA 1981).
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use requirement and qualify as prior art under §§ 102 and 103, Microsoft relied on a single
demonstration of an incomplete, experimental prototype version of the FXFE system in New York.
(3/18/08 Tr. at 201:7-19; 3/26/08 Tr. at 111:15-18) However, Lucent presented substantial evidence
showing that this single demonstration was not accessible to the public, as it was done privately
within Chemical Bank's offices, with an invitation only to Mr. Tyler, and there was no evidence that
members of the public were invited to attend, or that anyone actually used the prototype
demonstrator. (3/18/08 Tr. at 201:20-204:10; 3/19/08 Tr. at 11:14-21; 3/26/08 Tr. at 111:19-112:10)
Lucent also presented substantial evidence—indeed, it was undisputed—that the experimental
prototype FXFE system was then promptly abandoned, never sold, and never commercialized.
(3/18/08 Tr. at 204:22-205:25; 3/26/08 Tr. at 109:8-110:1; 112:11-113:2; see also Woodland Trust v.
Flowertree Nursery Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998) (use must be "accessible to the
public"); 35 U.S.C. § 102(g) (requiring that the invention was "made in this country by another
inventor who had not abandoned … it"))4 Accordingly, there was sufficient evidence from which the
jury could have reasonably concluded that Microsoft failed to present clear and convincing evidence
that the FXFE system was publicly used in the United States and abandoned, and thus find that it did
not constitute prior art under §§ 102 and 103.
3. The Jury Was Reasonably Entitled to Find that the FXFE System Did Not
Anticipate Claim 19.
At trial, Microsoft had the burden of proving that Lucent's patents were invalid by clear and
convincing evidence. See, e.g., Eli Lilly & Co. v. Barr Labs., Inc., 251 F.3d 955, 962 (Fed. Cir.
4 Microsoft also erroneously suggests that a "demonstration to a reporter … constitutes public use."
(MB at 7, citing Harrington Mfg. Co. v. Powell Mfg. Co., 815 F.2d 1478, 1479-80 (Fed. Cir. 1986))
But no such blanket rule exists. Indeed, the Federal Circuit has made clear that a determination of
public use requires an examination of "the totality of the circumstances." See, e.g., Bernhardt, L.L.C.
v. Collezione Europa USA, Inc., 386 F.3d 1371, 1379-81 (Fed. Cir. 2004). In Bernhardt, the Federal
Circuit reversed a judgment of invalidity based on the pre-market demonstration of a device to
customers and members of the press. Id. Significantly, the Federal Circuit looked at several factors
including the extent of public access, whether members of the public actually used the device, and the
extent of such use. Id.; see also Motionless Keyboard Co. v. Microsoft Corp., 486 F.3d 1376, 1385
(Fed. Cir. 2007) (reversing judgment of public use where alleged prior art device was only visually
inspected and tested "one time" and was "never connected to be used in the normal course of
business"); American Seating Co. v. USSC Group, Inc., 2005 WL 1224603, *5-6 (W.D. Mich. May
23, 2005) (despite absence of confidentiality agreement, the demonstration of single prototype is not
public use).
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2001) ("[A] moving party seeking to invalidate a patent … must submit such clear and convincing
evidence of invalidity so that no reasonable jury could find otherwise."). Anticipation "requires the
presence in a single prior art disclosure of each and every element of a claimed invention." Lewmar
Marine, Inc. v. Barient, Inc., 827 F.2d 744, 747 (Fed. Cir. 1987). Substantial evidence exists that the
FXFE system was missing several claim limitations, and the jury was reasonably entitled to find that
it did not anticipate claim 19.
As mentioned above, Microsoft mischaracterizes the nature of the FXFE system and the
invention of the '356 patent. Lucent presented evidence that the Slate project, which led to the
invention of the '356 patent, began in 1983, before the development of the FXFE system. (3/26/08
Tr. at 151:9-15, 152:12-153:1, 154:16-155:11) The FXFE system (to the extent it could be
understood from the limited evidence) was a "more primitive kind of system" that was outdated,
"slower," and "abandoned," and which did not include many of the inventive aspects of the '356
patent claims. (3/26/08 Tr. at 112:19-22, 114:2-6, 116:14-117:11) In this context, as discussed
below, substantial evidence exists that the FXFE system was missing several elements required by
claim 19 of the '356 patent, including "indicators," "inserting" into information fields, "information
fields," "concurrently displaying," and the use of "graphical" tools. Based on the absence of any one
of these limitations, the jury was entitled to find that the FXFE system did not anticipate claim 19.
a. The Jury Was Reasonably Entitled to Find that the FXFE System
Did Not Meet the "indicating" Step
Claim 19 requires the form entry system to have a way of "indicating" which field is active
and into which information is to be inserted. (PX 2) At trial, Microsoft's expert admitted that the
Datamation Article does not disclose this element. (3/18/08 Tr. at 181:24-182:8) Thus, Microsoft
relied only on the uncorroborated deposition testimony of Mr. Long to supply this missing element.
Id. As discussed above, the uncorroborated testimony of Mr. Long is insufficient to prove
anticipation, and the jury was entitled to disregard his testimony. See supra Section III.A.1.
Accordingly, the jury was reasonably entitled to find that the FXFE system did not present this
element and did not anticipate claim 19.
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b. The Jury Was Reasonably Entitled to Find that the FXFE System
Did Not Meet the "inserting" Step or Have "information fields"
Claim 19 requires that the form entry system "insert[] in said one field information that is
derived as a result of said user operating said displayed tool." (PX 2) At trial, Microsoft's expert
admitted that the Datamation Article does not disclose that information entered into an FXFE broker
cell is inserted into an information fields; rather the Datamation Article states only that information is
entered "into the system." (3/18/08 Tr. at 181:4-181:23; DX AOD at GW-LT 422220) Likewise,
Microsoft's expert admitted that the Datamation Article does not disclose the use of "information
fields." (3/18/08 Tr. at 180:21-181:23) Again, Microsoft relied on Mr. Long's testimony to supply
these missing elements. Id. And again, such uncorroborated testimony is insufficient to prove
anticipation, and the jury was entitled to disregard his testimony. See supra Section III.A.1.
Accordingly, the jury was reasonably entitled to find that the FXFE system did not present these
elements and did not anticipate claim 19.
c. The Jury Was Reasonably Entitled to Find that the FXFE System
Did Not Have "graphical" Tools
Claim 19 requires that there be a "tool adapted to allow said user to compose said
information," which this Court has construed to mean "a graphical keyboard tool or a graphical
number keypad tool, which allows the user to compose information by pointing to the display keys of
that tool." (PX 2; PX 7 at 9) Substantial evidence exists that the FXFE system did not use
"graphical" tools. (3/26/08 Tr. at 113:12-18) The parties' experts explained the differences between
using "text-mode" versus "graphics-mode" in a computer system—"text mode" in a computer allows
only for the display of text "but no graphical images." (Id. at 113:17-18, 120:6-15) Lucent's expert,
Mr. Tognazzini testified that there was "no evidence that the FXFE system was anything other than a
text-based system" and did not disclose any "graphical" tools. Id. Microsoft's expert also admitted
that there was no evidence that FXFE worked in "graphics mode." (3/18/08 Tr. at 180:15-18)
Accordingly, the jury was reasonably entitled to find that the FXFE system did not include this
element and did not anticipate claim 19.5
5 Microsoft suggests that this Court should have further defined the word "graphical" to mean
"pictorial" in order to support its contrived invalidity position. (MB at 6) But this Court's claim
(Continued…)
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d. The Jury Was Reasonably Entitled to Find that the FXFE System
Did Not Meet the Step of "concurrently displaying"
Claim 19 requires the form entry system to have a way of "concurrently displaying a
predefined tool associated with said one of said fields," which this Court has construed to mean
"displaying at the same time, as by a window overlaying the form." (PX 2; PX 7 at 9) At trial,
Lucent presented substantial evidence that the FXFE system did not use overlaid windows—or any
type of windows or windowing technology—a fact that was not disputed by Mr. Long. (3/18/08 Tr. at
179:8-180:6; 3/26/08 Tr. at 113:25-114:10, 115:18-116:10)
Microsoft now repeats its argument that this Court's construction should be broadened to
support its invalidity position. (MB at 5) But Microsoft's suggestion that the claim should be
broadened beyond windows and overlaid tools would vitiate the understanding relied on by the
parties since the Markman hearing in 2003. Indeed, at the Markman hearing this Court stated:
Concurrently displaying means displaying the overlay on a display of the form.
Concurrently displaying means displaying the overlay on a display of the form.
(9/23/03 Hr'g. Tr. at 45) (repeated twice by this Court) This Court's construction is supported
throughout the '356 patent which discloses only overlaying windowing technology—not the older
static-screen technology used in the FXFE system. (PX 2 abstract and 1:29-37, 2:62-64, 3:42-46,
3:48-51, 7:8-10; see also PX 6532-6535) Indeed, this Court again rejected Microsoft's argument
made during summary judgment proceedings:
Lucent argues that "concurrently displaying" should require display of an overlay, or
window, on the form … there is a factual question of whether the FXFE system
involved "concurrently displaying" within the meaning of the claims.
construction is entirely consistent with the patent specification, which discloses graphical tools
throughout—in the context of a computer graphical user interface—drawn and displayed at the pixel
level. (PX 2 at 2:44, 8:55-67, cols. 9-12, figs. 2-10) Moreover, Microsoft's request to further
construe a well-understood term used in this Court's claim construction is unfounded in the law,
because "after the court has defined the claim with whatever specificity and precision is warranted …
the task of determining whether the construed claim reads on the accused product is for the finder of
fact." PPG Indus. v. Guardian Indus., 156 F.3d 1351, 1355 (Fed. Cir. 1998). Indeed, in rejecting
defendants' summary judgment motion on invalidity, this Court has already (correctly) determined
that the question of "whether [FXFE] was truly a 'graphical' system"—whether the FXFE system
meets this limitation is—is a question for the jury. [D.I. 285 at 21]
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[D.I. 285 at 22]6 Accordingly, the jury was reasonably entitled to find that the FXFE system did not
present this element and did not anticipate claim 19.
4. The Jury Was Reasonably Entitled to Find that Neither the FXFE System
Nor the Datamation Article Rendered Obvious Claim 19 or 21 of the '356
Patent.
As discussed above, substantial evidence exists by which the jury was entitled to find that the
FXFE system did not disclose any of several required claim limitations. See supra Section III.A.3.
And with respect to the Datamation Article, Microsoft concedes that it does not disclose the
"indicating" limitation. (3/18/08 Tr. at 181:24-182:8) Substantial evidence also existed showing that
the Datamation Article does not disclose the "inserting" step, the use of "information fields," the use
of "graphical" tools, or the ability to "concurrently display" tools. (see supra Section III.A.3)
In the context of these missing limitations, Lucent introduced substantial proof to rebut any
assertion that it would have been obvious to modify the FXFE system, or use the teachings of the
Datamation Article, to arrive at the claimed invention. (3/26/08 Tr. at 116:14-117:11) For example,
Mr. Tognazzini testified that one of ordinary skill in the art would not have been motivated to add
these missing elements, at a minimum, because of the slow speed of the experimental version of the
FXFE system. Id. Further, Microsoft did not present any evidence or reason that one of ordinary
skill in the art would have been motivated to add "inserting" into information fields, "graphical"
tools, or "concurrently displaying" (windows) to the FXFE system. Indeed, Mr. Tognazzini testified
that adding windows, graphics, and indicators would have slowed down the system, and in fact, the
experimental version of the FXFE system "taught against" making such modifications in light of the
"speed issues" that ultimately led to the abandonment of the prototype FXFE system. Id.
Moreover, although the ultimate determination of obviousness is a question of law; it is a
question based on "underlying findings of fact, whether explicit or implicit within the [jury's]
verdict." See, e.g., Finisar Corp. v. DirecTV Group, Inc., --F.3d--, Nos. 2007-1023, 2007-1024, 2008
6 Microsoft's suggestion that this Court somehow changed its claim construction in a footnote is
wrong. (MB at 5) The Court's footnote from its May 15, 2007, summary judgment order is entirely
consistent with, and does not change, its construction. [Civ. No. 02-2060 D.I. 1795 at 7 n.3] It is
certainly possible to use overlaying windowing technology, yet place windows in a "side-by-side"
manner as recognized in the Court's footnote. Id. But what the Court's construction does not
encompass is older static-display technology that does not allow for displaying windows at all.
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WL 1757675, at *14 (Fed. Cir. Apr. 18, 2008). Such underlying findings of fact include the "scope
and content of the prior art, the differences between the prior art and the claims at issue, [and] the
level of ordinary skill in the pertinent art." Id. (citing Graham v. John Deere Co., 383 U.S. 1, 17-18
(1966)). Here, those underlying facts were plainly disputed by the parties and their experts. In such a
situation, the determination of obviousness turns on the jury's implicit findings of fact in reaching its
verdict that the patent claims were not rendered obvious. KSR Int'l. Co. v. Teleflex Inc., 127 S. Ct.
1727, 1733 (2007) (finding obviousness as a matter of law only where these underlying facts were
undisputed). On this record, the jury could have reasonably determined that neither the FXFE system
nor the Datamation Article rendered obvious claims 19 and 21 of the '356 patent.
5. The Jury Reasonably Found that YMM Did Not Render Obvious Claim
19.
Microsoft also contended at trial that YMM rendered obvious claim 19 of the '356 patent.
(3/18/08 Tr. at 164:2-8) But the YMM program was representative of the very keyboard-driven,
manual, and non-graphical systems over which the invention of the '356 patent improved. (PX 2 at
col. 1, Background of the Invention) (describing the invention of the '356 patent as an improvement
over "manual method[s] of filling in a form" which relied on the "keyboard") Indeed, Microsoft's
expert admitted at trial that YMM does not disclose several required elements of the "tool adapted to
allow said user to compose said information," which this Court construed to mean "a graphical
keyboard tool or a graphical number keypad tool, which allows the user to compose information by
pointing to the display keys of that tool." (PX 7 at 9)
a. The Jury Was Reasonably Entitled to Find that YMM did Not
Have "display keys" or Allow for "pointing to the display keys"
For example, Microsoft's expert admitted at trial that YMM does not allow a user to "point to
display keys," that it was designed exclusively for keyboard use, and that it was not designed to work
with a mouse or have onscreen display keys. (3/18/08 Tr. at 209:4-213:25; 3/26/08 Tr. at
121:10-123:5) Indeed, substantial evidence exists further showing that YMM does not disclose the
use of "display keys" at all. (3/26/08 Tr. at 118:18-119:10) For example, Mr. Tognazzini explained
that "they're not display keys … [n]ot only because you can't point to them, but this is not a graphical
system." Id. In other words, what was displayed on the screen in YMM were not "active" keys that
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could be pointed to, but rather, just a reconfigured display of keys pressed on the physical keyboard
with "no way to point to these numbers in this grid." (Id. at 118:4-119:10) Indeed, Lucent offered
substantial evidence that the so-called "onscreen calculator" did not allow a user to compose
information. (3/26/08 Tr. at 121:10-17) ("Q: It doesn't have anything to do with composing the
information, right? A: No, it doesn't.") Accordingly, the jury was reasonably entitled to find that
YMM did not disclose this element.
b. The Jury Was Reasonably Entitled to Find that YMM did Not
Have "graphical" tools
Further, it was undisputed that YMM operated in "text mode" and did not have "graphical"
tools. (3/18/08 Tr. at 207:21-208:20; 3/26/08 Tr. at 119:11-121:5) Substantial evidence (including
Microsoft's own Computer Dictionary) exists showing that "text mode" in a computer allows only for
the display of text "but no graphical images."7 (3/26/08 Tr. at 120:6-15) (emphasis added)
Accordingly, the jury was reasonably entitled to find that YMM did not disclose this element.
c. The Jury Was Reasonably Entitled to Find that YMM Did Not
Render Claim 19 Obvious
Lucent also introduced substantial evidence to rebut any assertion that it would have been
obvious to arrive at the invention of claim 19 in light of YMM, either on its own, or in combination
with a mouse, arrow keys, or other programs such as Windows 1.01.8 (3/26/08 Tr. at 123:6-129:8,
144:16-147:4, 156:14-160:19) For example, Lucent's expert discussed how, at the relevant time in
1986, Windows 1.01 was not a viable operating system and had no third-party application support.
7 Microsoft repeats its argument that this Court should have further defined the word "graphical" to
mean "a picture" in order to support its contrived invalidity position. (MB at 14) But as explained
above, this Court's claim construction is entirely consistent with the patent specification, which
discloses throughout graphical tools—in the sense of a computer graphical user interface—drawn and
displayed at the pixel level. (PX 2 at 2:44, 8:55-67, cols. 9-12; see also PPG Indus., 156 F.3d at 1355
("[A]fter the court has defined the claim with whatever specificity and precision is warranted … the
task of determining whether the construed claim reads on the accused product is for the finder of
fact."); D.I. 285 at 21 (deciding that "whether [FXFE] was truly a 'graphical' system"—whether the
FXFE system meets this limitation is—is a question for the jury")).
8 Microsoft's assertion that Mr. Tognazzini used the wrong standard in his obviousness analysis is
wrong. (MB at 14) Mr. Tognazzini properly considered whether it would have been obvious to one
of ordinary skill in the art to arrive at the invention of claim 19 in light of the prior art YMM
reference on its own, or in combination with a mouse, arrow keys, or other programs such as
Windows 1.01, based on the state of the art at the time. (3/26/08 Tr. at 123:6-129:8, 156:14-160:19)
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(Id. at 123:19-129:5; PX 5661-5667) Mr. Tognazzini explained that one of ordinary skill in the art
would not have been motivated to modify YMM in light of Windows 1.01 to arrive at the invention
of claim 19 of the '356 patent. Id. In fact, Mr. Tognazzini explained that system speed limitations at
the time and the absence of overlapping windows in Windows 1.01 would have taught away from
such a combination. Id. Likewise, Mr. Tognazzini explained that, due to speed limitations and
efficiencies at the time, there would have been no reason to modify YMM to work with mouse
functionality in DOS, or modify its use of arrow keys, such that YMM would have onscreen "display
keys" and the ability to point to onscreen "display keys" and otherwise meet the claim limitations.
(3/26/08 Tr. at 123:6-129:8, 144:16-147:4, 156:14-160:19)
Indeed, Lucent also presented testimony from the original YMM software designer,
Mr. Jones, who confirmed that YMM was designed to be used with a keyboard, and not with a
mouse, and that from a technical point of view, back at the relevant time, one could not combine
YMM with Windows 1.01. (3/18/08 Tr. at 213:25-216:19; 3/26/08 Tr. at 160:9-19) Moreover,
Mr. Jones also testified that "from both a technical and business standpoint, it made no sense to even
consider [mouse functionality]" for YMM. (3/18/08 Tr. at 213:25-216:19; 3/26/08 Tr. at 160:9-19)
Lucent also presented rebuttal evidence that Microsoft's so-called evidence of YMM mouse
functionality was a simulation—not true mouse functionality—and did not allow for "pointing to the
display keys." (3/26/08 Tr. at 145:8-146:14, 156:25-158:21) On this record, the jury could have
reasonably determined that YMM did not render obvious claims 19 and 21 of the '356 patent.
B. Lucent Presented Substantial Evidence From Which the Jury Reasonably
Concluded that Microsoft Infringes the '356 Patent.
As discussed below, Lucent presented substantial evidence at trial that Microsoft contributed
to and induced infringement of claims 19 and 21 of the '356 patent based on its sale of the Microsoft
Outlook, Microsoft Money, and Windows Mobile software products. (2/27/08 Tr. at 87:17-174:7)
Other than the "composition tool," Microsoft does not dispute that Outlook and Windows Mobile
practice each and every step of claim 19 (and claim 21 for Windows Mobile). (MB at 15-17)
Microsoft does not dispute that Microsoft Money practices each and every step of claim 19.
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1. Lucent Presented Substantial Evidence that Microsoft Outlook Includes a
Composition Tool.
As discussed above, claim 19 of the '356 patent requires a "tool adapted to allow said user to
compose said information" which this Court has construed to mean "a graphical keyboard tool or a
graphical number keypad tool, which allows the user to compose information by pointing to the
display keys of that tool." (PX 7 at 9) As Lucent's expert, Mr. Tognazzini, testified, a tool "which
allows the user to compose information," is a tool that allows for the "ability to compose" or "the
ability to build" or "the ability to combine." (2/27/08 Tr. at 80:16-84:18)
At trial, Lucent presented substantial evidence that the Microsoft Outlook calendar tool is
such a graphical keyboard or number keypad composition tool that "allows the user to compose
information." Id. Despite Microsoft's desire to mischaracterize the Outlook calendar tool as a menu
or list tool, substantial evidence exists demonstrating otherwise—the tool allows a user to first select
a month and year, and then combine that selection with a specific day of the month to ultimately
build or compose a complete date. (Id. at 131:1-133:4) Indeed, the ordinary meaning of "compose"
as used in the Court's claim construction is "combining" or to "put together." (2/28/08 Tr. at
111:5-112:11) Mr. Tognazzini further explained that because there are more than one million
possible dates that could be composed using the Outlook calendar tool, it was not practical to use a
list or menu tool to display a list of dates from which to choose; instead the Outlook calendar tool
allows a user to more easily compose or build a complete date from the constituent parts, by selecting
a month and combining it with a selected day. (2/27/08 Tr. at 135:22-136:6). Mr. Tognazzini also
explained that the Outlook calendar tool is different from a menu of alternatives type tool, because
one first selects a month and year, and "then you're selecting the day … you are assembling a series
of pieces of information." (2/28/08 Tr. at 107:15-108:19). Mr. Tognazzini further explained that the
Outlook calendar tool works by "combining of pieces of information … building an answer through
this combination." (Id. at 108:24-109:11). Lucent also presented a video demonstration of the
Outlook calendar tool, showing that it is necessarily a composition tool because it works when a user
first selects a month and year, and then combines or puts that together with a specific day to form a
complete date. (2/28/08 Tr. at 117:11-118:12, 162:2-4; PX 6291, 6295). Lucent also introduced
versions of the actual Outlook software and screenshots showing that the calendar tool works by
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allowing the user to first choose a month and combine that selection with a day to compose a
complete date. (e.g. PX 697, 1135-1140, 1138B, 1139B, 6230)
Indeed, Microsoft's own witnesses admitted that the Outlook calendar tool is a composition
tool. For example, Mr. Kennedy confirmed that the calendar tool works when a user first selects a
month and year, and then selects a specific day, and finally by putting together those selections, a
complete date is composed. (3/18/08 Tr. at 73:7-76:20; 3/26/08 Tr. at 102:21-104:3) Similarly,
Microsoft's own expert, Mr. Buscaino, also admitted that "a composition tool allows a user to put
together parts or putting together parts." (3/18/08 Tr. at 174:18-175:9; 3/26/08 Tr. at 104:4-105:1)
Contrary to Microsoft's assertions, "a graphical number keypad tool" is not limited to the
"number entry tool 60" shown in Figure 5 of the '356 patent specification. (2/27/08 Tr. at
218:25-219:14) Rather, as Mr. Tognazzini explained, the patent discloses different types of
"graphical number keypad tools" of "similar" format, including a number pad, a calculator, and a
"date pad" tool, all of which are considered different types of "graphical number keypad tools." Id.
("The date pad … has a format that is similar to the number pad….") Therefore, as Mr. Tognazzini
explained, the Outlook calendar tool was also a type of "graphical number keypad tool." Id.
2. Lucent Presented Substantial Evidence that Windows Mobile Includes a
Composition Tool.
Lucent likewise presented substantial evidence that Windows Mobile includes a composition
tool. Indeed, Mr. Tognazzini testified that Windows Mobile included "several" composition tools,
including both a pop-up onscreen keyboard and a calendar composition tool similar to the Outlook
calendar tool. (2/27/08 Tr. at 152:17-22; 154:20-156:4; see also PX 6244-47, 6536) Mr. Tognazzini
testified and demonstrated that the Windows Mobile onscreen keyboard works by allowing a user to
point or touch the onscreen display keys, which would place the corresponding keyboard characters
into the active information field. Id.
Microsoft's only argument regarding the Windows Mobile onscreen keyboard is its contention
that that is not "associated with said one of said fields" as required by claim 19. (MB at 17)
However, Mr. Tognazzini showed how the Windows Mobile keyboard is plainly associated with
whichever field is currently active by inserting characters into that field. (2/27/08 Tr. at
154:20-156:4; 3/26/08 Tr. at 107:18-108:23; see also PX 6536) Lucent presented substantial
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evidence that the Windows Mobile keyboard input "goes directly into the field as you are typing,"
and the active field is associated with the input from the onscreen keyboard. (Id.; see also PX 651;
PX 1507 (describing how Windows Mobile uses the onscreen keyboard to insert information into the
active fields)) Lucent also introduced working versions of Windows Mobile running on PDA devices
and screenshots that show that Windows Mobile has multiple composition tools in addition to the
onscreen keyboard, including a calendar composition tool (similar to the Outlook calendar tool) and a
number-pad tool. (See, e.g., PX 702-724, 831, 832, 832A, 832B, 1160, 1163, 1163A, 1164, 6244-47)
3. Lucent Has Shown Specific Acts of Direct Infringement.
As recognized by this Court in ruling on jury instructions, Lucent may prove infringement,
including specific acts of direct infringement, with circumstantial evidence. [D.I. 636 at 10] (citing
Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986)) And as discussed at
length, infra, in Section III.B.5, Lucent presented substantial evidence that Microsoft intended for its
customers to use the accused products in an infringing manner and that the normal and intended use
of the accused products involves the use of the accused features and performance of the claimed
method. Lucent also presented ample evidence discussed, infra, in Section III.B.5, that Microsoft
encouraged acts of direct infringement by encouraging others, through tutorials, instruction, help
files, web pages, and other materials, to use the accused products in an infringing manner.
The evidence presented by Lucent is more than sufficient to establish infringing use of the
accused products by defendants' customers. See, e.g., Golden Blount, Inc. v. Robert H. Peterson Co.,
438 F.3d 1354, 1363 (Fed. Cir. 2006) ("We reject [defendant's] argument that [patentee] could not
rely on the instruction sheets to prove acts of direct infringement by end-users."); Arthrocare Corp. v.
Smith & Nephew, Inc., 406 F.3d 1365, 1377 (Fed. Cir. 2005) (finding "strong circumstantial
evidence" of infringing use where instruction manuals taught how to perform the claimed method);
Moleculon, 793 F.2d at 1272 (upholding district court determination that circumstantial evidence of
extensive sales and dissemination of instructions satisfied burden of showing direct infringement).
Microsoft's reliance on the Acco and E-Pass cases (MB at 17) is misplaced, as Microsoft
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again disregards that direct infringement may be proven by circumstantial evidence.9 Symantec
Corp. v. Computer Assocs. Int'l, Inc., 522 F.3d 1279, 1293 (Fed. Cir. 2008); Moleculon, 793 F.2d at
1272. The Federal Circuit has recently rejected Microsoft's argument, reaffirming that a patentee is
not required to present direct evidence of specific acts of direct infringement. See, e.g., Symantec,
522 F.3d at 1293 (holding that "even though Symantec has not produced [direct] evidence that any
particular customer has directly infringed" there can still be a showing of infringement because
"direct evidence of infringement, as opposed to circumstantial evidence, is not necessary") (emphasis
added); Golden Blount, 438 F.3d at 1363.
Here, like in Moleculon, Lucent has not only presented evidence of extensive Microsoft sales,
but Lucent has also presented evidence of instructions, help files, and other materials where
Microsoft instructed its customers to use the accused software in an infringing manner—the normal
and intended use of the accused products. See infra references cited in Section III.B.5. Here, unlike
the circumstances in both E-Pass and Acco, the normal and intended use of the accused products and
tools is infringing. Lucent was entitled to rely on circumstantial evidence to prove that specific acts
of direct infringement occurred through the normal and intended use of the accused products, which
were admittedly sold to millions of customers. Moreover, Lucent also presented evidence and
testimony of Microsoft's employees, including testimony that they were aware of specific acts of
direct infringement based on the products accused of infringing the '356 patent. (See, e.g., 3/12/08
Tr. at 54:17-18) ("We know many customers use" the calendaring features of Outlook.).
4. Lucent Presented Substantial Evidence of Contributory Infringement.
To prove that a defendant contributed to infringement, a patentee must show that a defendant
"offers to sell or sells within the United States … a component of a patented machine, manufacture,
combination or composition, or a material or apparatus for use in practicing a patented process,
9 Moreover, the facts of Acco and E-Pass are very different. In E-Pass, the method at issue required
a very specific set of programming steps to be performed in a very specific order on a multi-function
credit-card like device, and no evidence existed that the defendant had ever instructed its customers
to perform the specified steps in the specified order. E-Pass Techs., Inc. v. 3Com Corp., 473 F.3d
1213, 1216 (Fed. Cir. 2007). And Acco is also inapposite, as the intended use of the accused device
in that case was non-infringing, and the accused party specifically instructed its customers to use the
system in a non-infringing manner. Acco Brands, Inc. v. ABA Locks Mfr. Co., 501 F.3d 1307, 1313
(Fed. Cir. 2007).
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constituting a material part of the invention, knowing the same to be especially made or especially
adapted for use in an infringement of such patent, and not a staple article or commodity of commerce
suitable for substantial noninfringing use." 35 U.S.C. § 271(c).10
The sole basis for Microsoft's position that it does not contribute to infringement is a legal
argument already rejected multiple times by this Court. Microsoft suggests that there are
non-infringing uses for the accused software products as a whole. But this Court already rejected
Microsoft's argument, recognizing that "contributory liability may be based on supplying a
component especially adapted to infringe a patent," even if that component is included with other
non-infringing components. [D.I. 636 at 3] (emphasis added) "Otherwise, a Defendant could always
avoid liability on contributory infringement" just by including an infringing component with some
non-infringing components. Id. (emphasis added); see also Philips Elecs. N. Am. Corp. v. Contrec
Corp., 411 F. Supp. 2d 470, 476 (D. Del. 2006). This Court also solidly rejected Microsoft's
argument after the previous Group 2 Audio trial, holding that "the Cyberlink Plug-in is not a staple,
and incorporating it into Windows Media Player does not somehow 'convert' it into a staple
ingredient." Lucent Techs. Inc. v. Gateway, Inc., 509 F. Supp. 2d 912, 930 n.11 (S.D. Cal. 2007).
In other words, Microsoft cannot escape contributory liability by packaging its accused
software programs with non-infringing components or features. The accused tools and form-entry
systems are not staple articles of commerce, and incorporating them into software programs cannot
somehow convert them into staple ingredients. Moreover, the fact that there may be additional,
non-infringing ways of using the accused software programs as a whole does not preclude
contributory infringement where—as is the case here—there are no non-infringing uses of the
10 Lucent presented substantial evidence as to each element of contributory infringement for each
accused product. (2/27/08 Tr. at 87:17-174:7) Microsoft does not dispute any element other than
substantial non-infringing use. (MB at 18-19) Overwhelming evidence exists that the accused tools
in the accused software products are a material part of the invention of claim 19, and they are
especially made to be used in a manner that infringes. Lucent presented substantial evidence that by
using the accused composition and menu tools, one necessarily infringes claim 19 because the
accused software products necessarily include the other steps of claim 19, such as information fields,
field labels, field indicators, and inserting information into fields. (See, e.g., for Outlook, 2/27/08 Tr.
at 122:8-137:11, 141:25-142:8; PX 1138B, 1139B, 6223-31; for Money, 2/27/08 Tr. at 90:19-102:16;
PX 6207-14; for Windows Mobile, 2/27/08 Tr. at 148:6-161:20; PX 6240-49)
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accused components. Id. Other courts have also soundly rejected Microsoft's faulty argument. For
example, in Philips, the defendants argued that the addition of a noninfringing method to their URC
was enough to give their device a substantial noninfringing use, even though it included the patented
method. Philips, 411 F. Supp. 2d at 476. The Court found such an argument "legally flawed." Id.
The Court stated that "it would indeed violate the 'logic of the patent laws' to allow a potential
infringer to avoid liability for contributory infringement by simply adding a noninfringing function to
a device that practices the patented method." Id.11 Here, the infringing tools are not staple articles,
and as discussed below, Lucent presented substantial evidence that the infringing tools have no
substantial non-infringing uses. Microsoft failed to offer any relevant contrary evidence.
a. Lucent Presented Substantial Evidence that Microsoft Contributes
to Infringement by Supplying Microsoft Outlook.
Lucent presented overwhelming evidence showing that there are no substantial non-infringing
uses for the component tools in Outlook, because, for example, the menu tools and calendar
composition tool components, when used, necessarily result in infringing use of the claimed method
because Outlook includes the other steps of claim 19, such as information fields, field labels, field
indicators, and inserting information into fields. (2/27/08 Tr. at 122:8-136:6; PX 6223-31) Further,
Microsoft presented no evidence that these components—the infringing features and tools of
Outlook—are staple articles of commerce.12 They are not, because they were "specifically designed"
11 Microsoft's' reliance on the Hodosh case is misplaced. In Hodosh, the Federal Circuit addressed a
patent covering a method of desensitizing teeth. Hodosh v. Block Drug Co., 833 F.2d 1575, 1576
(Fed. Cir. 1987). There, the defendant was accused of contributing to the infringement of the patent
by selling certain toothpastes. Id. at 1576-77. Because there was "no dispute" that use of defendant's
toothpaste infringed, the defendant attempted to rebut the contributory-infringement charge by
arguing that an ingredient of its toothpastes—potassium nitrate—was a staple article capable of
substantial noninfringing uses. Id. But this Court has already distinguished Hodosh from the
circumstances present here. Lucent Techs., 509 F. Supp. 2d at 930 n.11 ("This is not the
circumstances present in Hodosh … where a patented product incorporated a staple ingredient.").
Microsoft's reliance on the Hodosh case is also misplaced because Hodosh was an interlocutory
appeal limited to the issue of patent misuse. Hodosh, 833 F.2d at 1578. In that case, the misuse
inquiry focused on the mixture of toothpaste sold because the misuse statute required it, and the
misuse claim was premised on selling the mixture. Id. at 1577-79; see also 35 U.S.C. § 271(d)(1).
12 Microsoft suggests that there are non-infringing uses for Microsoft Outlook, as a whole, such as
sending email and managing tasks. (MB at 18) However, as discussed above, Microsoft's focus on
the entire software product, as a whole, is misplaced. Philips, 411 F. Supp. 2d at 476; Lucent Techs.,
(Continued…)
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to be used in Outlook. (Id. at 137:1-3) Thus, the jury reasonably concluded that by providing
Outlook and the infringing components incorporated therein, Microsoft contributed to the
infringement of claim 19.
b. Lucent Presented Substantial Evidence that Microsoft Contributes
to Infringement by Supplying Microsoft Money and Windows
Mobile.
Lucent likewise showed that there are no substantial non-infringing uses for Microsoft Money
and Windows Mobile because, for example, the menu tools and composition tools of Money and
Windows Mobile, when used, necessarily result in infringing use of the claimed method because the
accused programs include the other steps of claim 19, such as information fields, field labels, field
indicators, and inserting information into fields. (See, e.g., for Money, 2/27/08 Tr. at 90:19-102:16;
PX 6207-14; for Windows Mobile, 2/27/08 Tr. at 148:6-161:20; PX 6240-49) And again, Microsoft
presented no evidence that these components—the infringing features and tools of Money or
Windows Mobile—are staple articles of commerce.13 They are not, because they were "specifically
designed" to be used in Money (Id. at 103:20-23) and Windows Mobile (Id. at 162:9-163:2). For
example, Mr. Tognazzini explained that the onscreen keyboard component of Windows Mobile has
no "other use other than entering information into the fields" in an infringing manner. (Id. at
169:10-16) Thus, the jury reasonably concluded that by providing Money and Windows Mobile,
Microsoft contributed to the infringement of claims 19 and 21 of the '356 patent.
c. Software is a Component, Material, or Apparatus Under 35 U.S.C.
§ 271(c).
Microsoft erroneously suggests, in two footnotes, that software is not a component, material,
or apparatus for use in a process under 35 U.S.C. § 271(c). (MB at 19 n.10, 42 n.25) But Microsoft
misinterprets the Supreme Court's AT&T opinion and misstates the law. As an initial matter,
contributory infringement under § 271(c) was neither at issue nor addressed in the AT&T opinion.
Instead, the issues presented in AT&T related solely to § 271(f) and extraterritorial infringement.
509 F. Supp. at 930 n.11; D.I. 636 at 3.
13 Microsoft suggests that there are non-infringing uses for Microsoft Money and Windows Mobile
as a whole. (MB at 19). But again, as discussed above, Microsoft fails to focus on the components
of the software that are especially adapted for infringement. See supra Section III.B.4.
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Indeed, in that context, the Supreme Court expressly recognized that software is indeed a
"component" under § 271(f). Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746, 1755 (2007), citing
Eolas Techs., Inc. v. Microsoft Corp., 399 F.3d 1325, 1339 (Fed. Cir. 2005). This Court and other
courts have also rejected Microsoft's argument, recognizing that software may constitute a basis of
contributory infringement under § 271(c).14
5. Lucent Presented Substantial Evidence of Microsoft's Intent to Induce
Infringement of the '356 Patent.
Contrary to Microsoft's assertion (MB at 19), Lucent presented overwhelming evidence that
Microsoft induces infringement of claims 19 and 21. As an initial matter, Microsoft misstates the
proper legal standard. Sitting en banc, the Federal Circuit clarified the standard for specific intent to
induce infringement, holding that "[i]t must be established that the defendant possessed specific
intent to encourage another's infringement and not merely that the defendant had knowledge of the
acts alleged to constitute inducement. The plaintiff has the burden of showing that the alleged
infringer's actions induced infringing acts and that he knew or should have known his actions would
induce actual infringements." DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006)
(emphasis added). Indeed, in ruling on its jury instruction regarding this issue, this Court recently
rejected Microsoft's attempts to mischaracterize the law of inducement. [D.I. 636 at 2] This Court
recognized that one induces infringement if that person "knows or should have known that the
encouraged acts constituted infringement" and intended to cause infringement, and adopted a model
instruction consistent with DSU. Id. (emphasis added)
As set forth below, Lucent presented substantial evidence to support the jury's verdict that
Microsoft induces infringement. Lucent demonstrated that Microsoft encouraged others to engage in
acts that constituted direct infringement of the '356 patent, that Microsoft knew or should have known
that the encouraged acts constituted infringement, and that Microsoft specifically intended to cause
14 Lucent Techs., 509 F. Supp. at 930 ("[T]his Court leaves the legislature to consider whether
supplying software as an 'intangible' should be exempted from § 271(c)."); see also Pickholtz v.
Rainbow Techs., Inc., 260 F. Supp. 2d 980, 988 (N.D. Cal. 2003) (holding that software may be an
infringing component under § 271(c)); Construction Tech., Inc. v. Cybermation, Inc., 965 F. Supp.
416, 437 (S.D.N.Y. 1997) (same).
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the infringement and the encouraged acts. Lucent also demonstrated that Microsoft was aware of the
'356 patent, and Microsoft's inducement took place during the time the '356 patent was in force.15
For each of the accused products of the '356 patent, Lucent presented ample evidence that the
normal and intended use of those products infringes the asserted claims of the '356 patent. Lucent
also presented substantial evidence that Microsoft encouraged others, through tutorials, instruction,
help files, web pages, and other materials, to use the accused products in an infringing manner. See
infra this section. Direct evidence is not required to prove liability―circumstantial evidence is
sufficient to prove infringement, including intent to induce infringement. See Moleculon, 793 F.2d at
1272 ("[c]ircumstantial evidence is not only sufficient, but may also be more certain, satisfying and
persuasive"); see also Linear Tech. Corp. v. Impala Linear Corp., 379 F.3d 1311, 1326-27 (Fed. Cir.
2004) (intent to induce infringement of method claim may be shown by "sparse and not altogether
clear" circumstantial evidence); Nat. Instruments Corp. v. The MathWorks, Inc., 113 F. App'x 895,
898-99 (Fed. Cir. 2004) (same); Corning Inc. v. SRU Biosys., 400 F. Supp. 2d 653, 665 (D. Del.
2005) (same). Accordingly, sufficient evidence exists to establish that Microsoft intended to induce
infringement of the '356 patent through infringing use of the accused products.
Lucent presented evidence of instruction and tutorials that specifically teach Microsoft's
customers to use the software in an infringing manner—evidence such as "advertising" or
"instructing" demonstrate an "affirmative intent that the product be used to infringe."16 See, e.g.,
MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 936 (2005). Further, Lucent is entitled to "prove
direct infringement or inducement of infringement by either direct or circumstantial evidence" and
15 Lucent presented substantial evidence that Microsoft has been aware of the '356 patent for several
years. Lucent presented substantial evidence that Microsoft had knowledge of the '356 patent at least
as early as April 15, 2002, and also that Lucent asserted the '356 patent against Microsoft at least as
early as January 13, 2003. (3/11/08 Tr. at 119:4-23; PX 367; 3/13/08 Tr. at 107:15-108:16; PX 254)
16 Defendants cite E-Pass Techs., Inc. v. 3Com Corp., 473 F.3d 1213 (Fed. Cir. 2007), and suggest
that Lucent has failed to present evidence that defendants specifically induced infringement of each
step of claim 19 of the '356 patent. (MB at 19) Microsoft's reliance on E-Pass, however, is
misplaced, as the method at issue in that case required a very specific set of programming steps to be
performed in a very specific order on a multi-function credit-card like device, and no evidence
existed that the defendant had instructed its customers to perform the specified steps in the specified
order. Id. at 1216. Here, however, Lucent presented substantial evidence that the normal and
intended use of the accused products involves the use of the infringing tools.
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lack of direct evidence of specific inducement "does not render the case presented to the jury
unreasonable." See Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1219-20 (Fed. Cir.) cert.
denied, 127 S. Ct. 599 (2006); see also Nat'l Instruments. Corp. 113 F. App'x at 898 (circumstantial
evidence and training materials that induce performance of an infringing method "presents substantial
evidence for the jury to find … induced infringement").17
a. Microsoft Intends for Money to be Used in an Infringing Manner.
Lucent presented substantial evidence that use of Microsoft Money performs each and every
step of claim 19. (2/27/08 Tr. at 90:19-102:16) Indeed, at trial, Microsoft did not contend otherwise.
(3/26/08 Tr. at 105:7-14).
Lucent also presented substantial evidence that use of the infringing features is important in
Microsoft Money, that Microsoft values the infringing features, that the normal and intended use of
Money involved use of the infringing features, and that Microsoft encouraged and intended users to
infringe by using the infringing features. (2/27/08 Tr. at 102:17-103:16, 104:16-111:2, 112:9-117:15;
2/28/08 Tr. at 89:20-91:1, 143:10-17; 3/12/08 Tr. at 53:2-19, 56:10-61:8) Significantly, Lucent
showed that the normal and intended use of Money involves the use of the menu tools and
composition tools, which use necessarily results in infringement of the claimed method because
Money admittedly includes the other limitations of claim 19, such as information fields, field labels,
17 Moreover, where the normal and intended use of an accused product involves an infringing use, a
patentee may prove induced infringement where the defendant intends for the accused product to be
used in such a normal and intended manner. See, e.g., Chiuminatta Concrete Concepts, Inc. v.
Cardinal Indus., Inc., 145 F.3d 1303, 1307, 1311-1312 (Fed. Cir. 1998) (affirming summary
judgment of induced infringement of method claim where "normal commercial use" of accused
product met claim limitations); Cross Med. Prods., Inc. v. Medtronic Sofamor Danek, Inc., 424 F.3d
1293, 1314 (Fed. Cir. 2005) (recognizing that "a reasonable juror could find" induced infringement
where accused product was "designed … to function" in an infringing manner); Nat'l Instruments,
113 Fed. Appx. at 898-99 (affirming jury verdict finding induced infringement of method claim
based on "circumstantial evidence" that accused software "was designed to infringe during its normal
use"); Hilgraeve Corp. v. Symantec Corp., 265 F.3d 1336, 1343-44 (Fed. Cir. 2001) (holding that the
sale of software may constitute induced infringement of a method claim, even where the software "is
capable of non-infringing modes of operation;" the probative inquiry is the "normal operation of the
accused [software] products"); Dennison Mfg. Co. v. Ben Clements & Sons, Inc., 467 F. Supp. 391,
428 (S.D.N.Y. 1979) ("The fact that defendant does not actually instruct the ultimate users of the
product in its use does not prevent our finding active inducement of infringement [of method claims],
since the intended manner or use of the product is readily apparent.").
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indicators, and the insertion of information into fields. (2/27/08 Tr. at 90:19-102:16; PX 6207-14)
For example, Mr. Tognazzini testified that the infringing tools of Money, including the
composition tools, are "very important" to its operation. (2/27/08 Tr. at 102:22-104:15) And after
reviewing thousands of pages of Microsoft documents and webpages, Mr. Tognazzini testified that
using the infringing tools is "central" and "very important" to the normal and intended operation of
Money. (2/27/08 Tr. at 102:17-103:16) Mr. Tognazzini testified that Microsoft not only promoted
the "ease of use" of the programs, but also "teach[es] how to use these [infringing] tools. And even
within the teaching, they're promoting their use." (2/27/08 Tr. at 104:24-105:1)
Lucent also showed that Microsoft provided instruction, tutorials, help files, web pages, and
other materials directing users to use Money in an infringing manner, that the normal and intended
use of Money involves the infringing tools, and that Microsoft valued and marketed the infringing
features. (PX 629, 678, 742, 971, 972, 1505, 1121B, 1124B, 1129B, 1218, 5158) Lucent
demonstrated how the Money help files specifically teach the use of the infringing composition and
menu tools. (e.g. PX 1121B, 1124B) The help files expressly teach users to use a composition tool
by "click[ing] the down arrow to use an in-field calculator" and to use a menu of alternatives tool by
"[i]n the Category box, select[ing] . . . from the list." Id. In addition to the embedded help files,
Lucent introduced evidence showing that Microsoft offers extensive online tutorials, user guides,
videos, newsgroups, and other support for every version of Money, including teaching the use of the
infringing tools. (e.g. PX 678, 742) Other Microsoft documents recognize that Money necessarily
makes use of the infringing tools, such as the menu of alternatives "list box." (e.g. PX 972) Lucent
also presented press releases where Microsoft touted the "intuitive" interface and "leading tools" used
in Money. (e.g. PX 5158) Lucent also presented evidence and testimony of Microsoft's employees,
including testimony that Microsoft publicized the "elegant, intuitive user interface" and "user
friendly" and "easy to use" accused tools of Money. (3/12/08 Tr. at 56:24-59:7)
Lucent also presented substantial evidence that Microsoft offered Microsoft Money for sale
during and after the time it became aware of the '356 patent, and after the time that Microsoft was
aware of Lucent's specific infringement contentions with respect to Money. (2/27/08 Tr. at
117:22-120:5; 3/13/08 Tr. at 160:1-168:12; see also supra n.14) Thus, Lucent presented ample
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evidence from which the jury could reasonably conclude that Microsoft encouraged infringing use of
Money, and that Microsoft knew, or should have known, that customers of Money were infringing
the '356 patent, and that Microsoft specifically intended such infringement.
b. Microsoft Intends for Outlook to be Used in an Infringing Manner.
Lucent presented substantial evidence that use of Outlook performs each and every step of
claim 19. (2/27/08 Tr. at 122:8-136:6) Indeed, Microsoft did not dispute that Outlook met each of
the claim limitations other than a composition tool. (3/26/08 Tr. at 101:25-102:8; see also supra
Section III.B.1) Lucent also presented evidence that use of the infringing features is important in
Microsoft Outlook, that Microsoft valued the infringing features, that the normal and intended use of
Outlook involved use of the infringing features, and that Microsoft encouraged and intended users to
infringe by using the infringing features. (2/27/08 Tr. at 136:7-145:5; 2/28/08 Tr. at 89:20-91:1,
143:10-17; 3/12/08 Tr. at 53:5-56:9) Significantly, Lucent showed that the normal and intended use
of Outlook involves the use of the menu tools and calendar composition tool, which use necessarily
results in infringement of the claimed method because Outlook and admittedly includes the other
limitations of claim 19, such as information fields, field labels, field indicators, and the insertion of
information into fields. (2/27/08 Tr. at 122:8-136:6; PX 6223-31)
For example, Lucent presented substantial evidence that the infringing tools in Outlook,
including the calendar composition tool, are central to the functionality of Outlook. (Id. at
136:7-137:11) The Outlook help files teach that use of the accused Appointment feature necessarily
uses form entry and "every Outlook item is based on a form." (PX 1138B, 1139B) After reviewing
thousands of pages of Microsoft documents and webpages, Mr. Tognazzini testified that using the
infringing tools is "central" to the normal and intended operation of Outlook. (2/27/08 Tr. at
136:7-10, 136:22-137:7, 140:3-7) And Mr. Tognazzini testified that Microsoft "intend[ed] users to
use the forms and the different tools," "specifically promote[d] Outlook and its ease of use," and
"encourag[ed] their customers to use the tools and the forms." (Id. at 136:17-21, 141:22-142:11).
Lucent also showed that Microsoft provided instruction, tutorials, help files, web pages, and
other materials directing users to use Outlook in an infringing manner, that the normal and intended
use of Outlook involves the infringing tools, and that Microsoft valued and marketed the infringing
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features. (PX 501, 626, 1138B, 1139B).18 Lucent demonstrated how the help files in Outlook teach
users that "[e]very Outlook item is based on a form" and that users should use the "appointment"
feature "to represent a meeting or scheduled event." (e.g. PX 1138B, 1139B). The embedded help
files in Outlook are also directly linked to Microsoft's website, which further provides extensive
online tutorials, help, videos, walk-throughs, and other support for various versions of Outlook,
including teaching the use of the infringing tools; and Mr. Tognazzini testified that he reviewed
substantial amounts of such promotional material, examples of which were offered at trial. (2/27/08
Tr. at 141:17-21; see also, e.g., PX 626, 1135, 1136, 1137, 1138, 1139, 1140) Lucent also presented
press releases where Microsoft touted the "usability" and "intuitive" interface in Outlook, including
for working with "appointments." (e.g. PX 501). Lucent also presented testimony of Microsoft's
employees, including testimony that Microsoft publicized the accused tools and calendaring features
of Outlook. (3/12/08 Tr. at 54:3-9, 54:20-25, 55:16-56:2)
Lucent also presented substantial evidence that Microsoft offered Microsoft Outlook for sale
during and after the time it became aware of the '356 patent, and after the time that Microsoft was
aware of Lucent's specific infringement contentions with respect to Outlook. (2/27/08 Tr. at
145:6-147:15; 3/13/08 Tr. at 168:13-174:21; see also supra n.14) Thus, Lucent presented ample
evidence from which the jury could reasonably conclude that Microsoft encouraged infringing use of
Outlook, and that Microsoft knew, or should have known, that its customers of Outlook were
infringing the '356 patent, and that Microsoft specifically intended such infringement.
c. Microsoft Intends for Windows Mobile to be Used in an Infringing
Manner.
Lucent also presented substantial evidence that use of Windows Mobile performs each and
every step of claims 19 and 21. (2/27/08 Tr. at 148:6-161:20) Indeed, Microsoft did not dispute at
trial that Windows Mobile met each of the claim limitations other than a composition tool. (3/26/08
Tr. at 107:8-17; see also supra Section III.B.2)
18 Lucent's expert, Mr. Tognazzini, provided such opinion and testimony after reviewing thousands
of pages of Microsoft documents and webpages, including documents that were introduced at trial.
Lucent also introduced as evidence executable copies of the accused Outlook software. (e.g. PX
1135, 1136, 1137, 1138, 1139, 1140). Additional help files, instructions, and tutorials are also
included and embedded within the executable software itself. Id.
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Lucent also presented evidence that use of the infringing features is important in Windows
Mobile, that Microsoft valued the infringing features, that the normal and intended use of Windows
Mobile involved use of the infringing features, and that Microsoft encouraged and intended users to
infringe by using the infringing features. (2/27/08 Tr. at 161:21-170:8; 2/28/08 Tr. at 89:20-91:1,
143:10-17; 3/12/08 Tr. at 61:9-62:2, 65:13-68:19) Significantly, Lucent showed that the normal and
intended use of Windows Mobile involves the use of the menu tools and composition tools, which
use necessarily results in infringement of the claimed method because Windows Mobile admittedly
includes the other limitations of claim 19, such as information fields, field labels, field indicators, and
the insertion of information into fields. (2/27/08 Tr. at 148:6-161:20; PX 6240-49) For example,
Lucent presented substantial evidence that the infringing tools in Windows Mobile, including the
composition tools, are critical to the functionality of Windows Mobile. (Id. at 161:21-163:11)
Indeed, after reviewing thousands of pages of Microsoft documents and webpages, Mr. Tognazzini
testified that using the infringing tools is "central" to the normal and intended operation of Windows
Mobile. Id. Mr. Tognazzini testified that "[t]he whole idea of organizing personal information and
being able to bring up appointments and get reminders before meetings … all these kinds of activities
are central to such [PDA] devices." (Id. at 161:24-162:3; see also 169:4-23)
Lucent also showed that Microsoft provided instruction, tutorials, help files, web pages, and
other materials directing users to use the software in an infringing manner, and showing that
Microsoft valued and marketed the infringing features. (PX 627, 628, 647, 648, 649, 650, 652, 654,
651, 671, 832, 832A, 832B, 1163A, 1507, 5163) Lucent also presented documentation, manuals,
screenshots, press releases, and actual working devices showing that the normal and intended use of
Windows Mobile on a PDA involved a stylus for inputting information, and necessarily involved
composition tools such as the onscreen keyboard. (e.g., PX 651, 652, 832, 832A, 832B, 1163A,
1507, 5163) And as with the other Microsoft products, Microsoft's website contains extensive
product support and promotional materials, which Mr. Tognazzini reviewed in forming his opinions.
(2/27/08 Tr. at 141:17-21) Lucent also presented testimony of defendants' employees, including
testimony regarding demand for PDAs. (3/12/08 Tr. at 39:11-40:1, 40:9-24, 67:12-68:1)
Lucent also presented substantial evidence that Microsoft offered for sale Windows Mobile
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during and after the time it was aware of the '356 patent, and after the time that Microsoft was aware
of Lucent's infringement contentions with respect to Windows Mobile. (2/27/08 Tr. at 170:9-173:4;
3/13/08 Tr. at 174:22-180:7; see also supra n.14) Thus, Lucent presented ample evidence from
which the jury could reasonably conclude that Microsoft encouraged infringing use of Windows
Mobile, and that Microsoft knew, or should have known, that users of PDAs running Windows
Mobile were infringing the '356 patent, and that Microsoft specifically intended such infringement.
6. The Jury's Verdicts Regarding Infringement by Microsoft and Dell are
Not Inconsistent and Microsoft is Not Entitled to a New Trial.
Microsoft suggests that it is entitled to a new trial because the jury found that Microsoft
infringes but Dell does not. [D.I. 735, Special Verdict Form at 3-4] As discussed above, Lucent
presented overwhelming evidence showing that Microsoft induced and contributed to infringement of
claims 19 and 21 of the '356 patent. Thus, the fact that the jury found that Dell does not infringe does
not make its verdict with respect to Microsoft "fatally inconsistent" such that there is no "reasonable
way to read the verdicts as expressing a coherent view of the case." See, e.g., Toner for Toner v.
Lederle Labs., 828 F.2d 510, 512 (9th Cir. 1987).
While Lucent believes that the jury's verdict with respect to Dell was against the clear weight
of the evidence, as set forth in Lucent's co-pending Motion for Judgment as a Matter of Law or New
Trial, [D.I. 760-2 at 29-36], that fact does not compel a finding that the verdicts are inconsistent.
Indeed, because contributory infringement and infringement by inducement requires either
knowledge or specific intent, the jury may have concluded that Microsoft acted with the requisite
knowledge and intent while Dell did not. Thus, there exists a "way to read the verdicts as expressing
a coherent view of the case."
C. This Court Properly Construed the Claims of the '356 Patent and Microsoft is
Not Entitled to a New Trial.
This Court has already (multiple times) properly rejected Microsoft's argument that the term
"concurrently displaying" should be limited to mean "automatically." [See, e.g., Civ. No. 02-2060
D.I. 152, 175, 1552]. This claim construction issue was discussed at length during the Markman
hearing, and this court properly determined that "concurrently displaying" was not limited to the
automatic display of tools. (9/22/03 Hr'g. Tr. at 264) ("THE COURT: It doesn't come up
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automatically. I think I've decided that.") And last year, defendants sought to reconstrue this term on
the eve of trial. This Court entertained briefing, and again, expressly rejected Microsoft's arguments.
(PX 7 at 1) ("Having now fully considered the parties' briefs and the oppositions filed thereto, the
Court hereby retains the construction of the term ['concurrently displaying'].") As Lucent
demonstrated during the Markman hearing and subsequent briefing, the '356 patent discloses several
examples and embodiments where predefined tools need not be automatically displayed; it would be
improper to so limit the claim term and exclude the disclosed embodiments. [Civ. No. 02-2060 D.I.
1365, 1488] Accordingly, this Court's claim construction of "concurrently displaying" was correct,
Microsoft was not prejudiced, and Microsoft is not entitled to a new trial.
D. This Court's Jury Instructions on Induced and Contributory Infringement Were
Correct and Microsoft is Not Entitled to a New Trial.
The Court correctly instructed the jury on contributory and induced infringement. In its brief,
Microsoft rehashes two arguments that the Court already considered and rejected.19
1. This Court's Jury Instructions Contributory Infringement Were Correct.
Microsoft argues that the Court's instruction on contributory infringement (Instruction No. 22)
was incorrect because it focused on whether the accused "component" has substantial non-infringing
uses. (MB at 21) Microsoft would have preferred the Court's instruction to focus on whether the
"thing sold" has substantial non-infringing uses, because then Microsoft could have argued that—
although its products include components that are especially adapted to infringe the patents-in-suit—
it escapes liability for contributory infringement simply because it has chosen to package those
components with unrelated, non-infringing features. Not surprisingly, the law does not allow an
19 Microsoft also suggests the Court might have erred by refusing to include separate special verdict
questions on contributory infringement and induced infringement. But such decision was a matter
entirely within the Court's discretion and therefore provides no basis for a new trial. District courts
have near absolute discretion in deciding whether to use a special verdict as opposed to a general
verdict. See Wright & Miller, Federal Practice and Procedure § 2505 ("Although ... there are
frequent judicial statements in the reported cases that the district court's decision whether or not to
use a special verdict under Rule 49(a) is reviewable by the court of appeals only for abuse of
discretion, there appears never to have been a reversal on this ground."); see also United States v.
Real Property Located at 20832 Big Rock Drive, Malibu, 51 F.3d 1402, 1408 (9th Cir. 1995)
("discretion extends to determining the content and layout of the verdict form"); Lummus Indus., Inc.
v. D.M. & E. Corp., 862 F.2d 267, 273 (Fed. Cir. 1988) (same).
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infringer to so easily circumvent liability for misappropriating a patented invention.
As discussed above in Section III.B.4, courts have recently rejected Microsoft's argument,
recognizing that it would "allow a potential infringer to avoid liability for contributory infringement
by simply adding a noninfringing function to a device that practices a patented method." Philips, 411
F. Supp. 2d at 476 see also Lucent, 509 F. Supp. 2d at 930 n.11; Imagexpo, L.L.C. v. Microsoft Corp.,
284 F. Supp. 2d 365, 368 (E.D. Va. 2003); Oak Indus., Inc. v. Zenith Elecs. Corp., 697 F. Supp. 988,
994-95 (N.D. Ill. 1988). Finally, as discussed above, Microsoft's reliance on the Hodosh case is
misplaced, and this Court has already distinguished Hodosh. See supra Section III.B.4.
2. This Court's Jury Instructions on Induced Infringement Were Correct.
Microsoft argues that the Court's instruction on induced infringement (Instruction No. 21) was
erroneous because it stated that "one element of inducement is whether 'the person has intent to cause
the encouraged acts.'" (MB at 21) Microsoft ignores the remainder of the instruction, and suggests
that the Court's construction somehow failed to "focus on whether Microsoft had the intent to cause
an infringement," as required by DSU Medical Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006).
But the Court's instruction precisely and correctly instructed that:
[It is not] sufficient that Microsoft or Dell were aware of the act(s) that allegedly
constitute direct infringement. Rather, you must find that Microsoft or Dell
specifically intended to infringe the patent, in order to find inducement of
infringement. If you do not find that Microsoft or Dell specifically intended to
infringe, then you must find that Microsoft or Dell have not actively induced
infringement.
(See Instruction No. 21) (emphasis added) This is entirely consistent with DSU's requirement that the
accused inducer "have an affirmative intent to cause direct infringement," DSU Med., 471 F.3d at
1306. Indeed, the Court's instruction on intent further stated that inducement requires "purposefully
urg[ing] or encourage[ing] another to infringe a patent"; the accused must "know[] or should have
known that the encouraged acts constitute infringement" and have "intent to cause the encouraged
acts." (See Instruction No. 21) The Court's instruction was a proper statement of the law and did not
mislead the jury with respect to the intent requirement of inducement.
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IV. THE '295 PATENT: INFRINGEMENT
A. Lucent Presented Substantial Evidence that Windows XP Tablet PC Compares a
Tap to a Predefined Shape.
Microsoft presented only one noninfringement argument regarding the '295 patent: that the
accused products allegedly do not compare each gesture to at least one predefined shape. Lucent,
however, presented substantial evidence (including Microsoft's own source code and documents)
demonstrating that the accused Windows XP Tablet PC products perform that function. For example,
Lucent's expert on the '295 patent, Mr. Jean Renard Ward, testified that the accused Tablet PC
products practice every limitation of claim 1. (2/28/08 Tr. at 210:6-277:16) Lucent also introduced
the defendants' own documents, source code, and actual Windows XP Tablet PC devices showing
that those devices infringe claim 1. (PX 964, 965, 557, 749, 5544, 5590, and 5594) Significantly,
Lucent presented substantial evidence that the accused Tablet PC products recognize the tap gesture
by comparison to a predefined shape. (2/28/08 Tr. at 255:12-20, 258:2-24, 260:1-19; 2/29/08 Tr. at
41:4-44:6; 3/26/08 Tr. at 237:19-24, 238:10-14, 239:16 - 240:12, 241:25 - 242:4, 242:23 - 246:1,
270:11-15) Mr. Ward presented detailed analysis of the code algorithm used by the accused products
to recognize a tap gesture, including proof that the algorithm recognizes a gesture by comparing it to
a predefined shape. (Id.; PX 964, 965)
For example, Mr. Ward explained how the source code compares the tap gesture to the shape
of a dot:
Q. How do the two tests that are used by the source code for the accused products
compare a tap gesture with a predefined shape?
A. They compare it with a dot by seeing how close the input is to being actually a single
dot.
(3/26/2008 Tr. at 238:10-14 (emphasis added); see also id. at 237:19-24, 238:15-249:8; 2/28/08 Tr. at
252:12-257:5; 257:12-16; 258:2-4; 258:10-262:15) Lucent also showed that the accused source code
compares the tap gesture to a predefined shape in another sense—by attempting to fit the gesture into
a square "bounding box" to determine whether the user intended a tap:
Q. So you're explaining how tablet PC recognizes whether this is a tap or not?
A. That's correct, yes.
Q. Okay. What does it do first?
A. So, as I mentioned, there are two tests, and the first test is to look to see if the tap -- the
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maximum tap distance is less than or equal to 100 units. What this boils down to
saying is does the collection of points that we have here actually fit within a one
millimeter square, and so that's the first test that's performed.
(3/19/2008 Tr. at 244:3-12 (emphasis added).)
In addition, Mr. Ward confirmed his analysis with Microsoft's own documents stating that the
tap is a gesture that matches a shape — or glyph — defined by the source code. (PX 964, 965, 5544;
2/28/08 Tr. at 248:11-257:5, 257:12-262:15; 3/26/08 Tr. at 235:19-242:13; 242:20-246:1). The
defendants nevertheless disputed infringement on the single ground that the accused products
allegedly fail to compare gestures to predefined shapes.20 But even Dr. Kelly admitted Microsoft's
own documents identify a tap as a gesture, state that a gesture is an ink stroke or pen movement that
matches the set of glyphs defined by the recognizer, and disclose that a glyph is a predefined symbol.
(3/20/08 Tr. at 45:14-46:9; PX 5544) Although Dr. Kelly originally testified that the accused
products' source code does not disclose such glyphs (see, e.g., 3/20/08 Tr. at 46:10-24, 64:7-13),
Lucent proved on rebuttal that Dr. Kelly's statements were false. The source code for the accused
product references glyphs in numerous places, and recognizes tap gestures by comparing them to a
predefined shape. (PX 964, 965, 6326; see specifically, Source Code Page MSLT 0727643)
Accordingly, the jury was entitled to conclude that the accused Windows XP Tablet PC edition
software recognizes gestures by comparing them with a predefined shape.
B. Lucent Presented Substantial Evidence that Microsoft Induced and Contributed
to the Infringement of Claim 1 of the '295 Patent.
1. Lucent Presented Substantial Evidence That Microsoft Induced
Infringement.
Lucent presented substantial evidence from which a reasonable jury could conclude that
Microsoft knew, and specifically intended, that Tablet PC manufacturers install the Tablet PC
operating system on computers with rear-mounted digitizers. Lucent presented abundant evidence
that Microsoft specifically told computer manufacturers to build Tablet PC computers that infringe
20 Relying on inventor testimony, Microsoft contends that this function requires comparison of
gestures with "an internal database of characters and their relevant features." (MB at 39). The
Court's construction dictates no such requirement (PX 6 at 4), and the Federal Circuit has clearly
stated that inventor testimony has no bearing on a claim's meaning. See, e.g., Markman v. Westview
Instruments, Inc., 52 F.3d 967, 991 (Fed. Cir. 1995).
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claim 1, including by using a rear-mounted digitizer. (PX 749, 5590) No dispute exists that
Microsoft provides Tablet PC Edition software to Tablet PC manufacturers. (2/28/08 Tr. at
188:19-24, 189:6-25) Nor is there any dispute that Microsoft provides technical specification
requirements to the Tablet PC manufacturers and intends for the manufacturers to assemble
infringing Tablet PC computers in accordance with the instructions. (2/28/08 Tr. at 217:2-218:5,
218:12-220:2, 221:7-12; PX 557, 749, 5590) Lucent also presented substantial evidence that
Microsoft encouraged computer manufacturers, through hardware requirements, specifications,
FAQs, help files, and web pages, to manufacture the infringing Tablet PC products in an infringing
configuration. (2/28/08 Tr. at 217:2-218:5, 218:12-220:2, 221:7-12; PX 557, 749, 5590) Indeed, the
overwhelming evidence shows that Microsoft intends for computer manufacturers to build Tablet
PCs having rear-mounted digitizers. Id.
For example, Microsoft published Tablet PC Hardware Requirements that required computer
manufacturers to build devices with rear-mounted digitizers. (2/28/08 Tr. at 220:20-23; PX 749)
Microsoft's Tablet PC Hardware requirements state that the digitizer must be integrated with the
display screen and include proximity sensing—the digitizer "must report x and y stylus position
coordinates accurately when the stylus tip is within 5 millimeters (mm) of the writing surface." (PX
749) The only commercially available digitizers meeting these requirements for use in portable
personal computers were rear-mounted. (2/29/08 Tr. at 91:16-92:13) Indeed, Microsoft's expert Dr.
Kelly admitted "there are no front-mounted digitizers that I am aware of that would meet [Microsoft's
hardware] requirements." Id. Ample evidence, including Microsoft's own documents, further
establishes that Microsoft knew that Tablet PC digitizers had to be rear-mounted. (PX 749; PX 5590)
In sum, Lucent presented ample evidence to support findings that (1) Microsoft induced
Tablet PCs to be built and sold using rear-mounted digitizers, (2) Microsoft knew, or should have
known, that the sale and use of Tablet PCs running Windows XP Tablet PC edition software
constituted infringement of claim 1 of the '295 patent, and (3) Microsoft specifically intended for the
infringing sale and use of Tablet PCs running Windows XP Tablet PC edition software.
2. Lucent Presented Substantial Evidence That Microsoft Contributed to
Infringement.
Microsoft argues that the accused Tablet PC products may have non-infringing uses because
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allegedly (1) they can be made with front-mounted digitizers, (2) they have "many other substantial
non-infringing uses," and/or (3) they "can recognize dozens of gestures that Lucent did not accuse of
infringement." (MB at 42) None of Microsoft's arguments justify departure from the jury's
infringement verdict concerning the '295 patent.
Regarding Microsoft's first argument, Lucent presented substantial evidence that
front-mounted digitizers were not commercially available during the relevant time period for use in a
portable personal computer. The normal and intended use and installation for Windows XP Tablet
PC Edition software, as set forth by Microsoft's very own documents, required electromagnetic
digitizer hardware that detects proximity. See supra Section V.B.1. The defendants' own expert, Dr.
Kelly, admitted that he knew of no commercially available front-mounted electromagnetic digitizer
available in the entire world that would detect proximity. (2/29/08 Tr. at 91:13-92:18) Indeed,
Lucent presented undisputed evidence showing that between 2003 and late 2007, the only Tablet PCs
compatible with Microsoft's hardware requirements for licensing Windows XP Tablet PC edition
operating system used rear-mounted digitizers. (PX 749, 5590)21 The possibility that Microsoft's
accused software may be used in a noninfringing computer today therefore fails to resolve Microsoft
of contributory infringement liability during the relevant time-frame.
Regarding Microsoft's remaining "non-infringing use" arguments, Microsoft misstates the law
and misrepresents the facts. Microsoft suggests that there may be non-infringing uses for the accused
Windows XP Tablet PC operating system as a whole or other non-infringing ways of using a Tablet
PC. But as discussed at length above, this Court has already rejected Microsoft's argument in this
regard. See supra Section III.B.4.
In any case, Lucent introduced overwhelming evidence that the normal and intended use of a
Tablet PC is with a stylus and gestures. (2/28/08 Tr. at 212:1-22; PX 749) Lucent showed that the
accused tap and double-tap gestures, used at both the operating-system level and application level,
are critical gestures whose use is necessary in successfully operating a Tablet PC. (2/29/08 Tr. at
21 To the extent Microsoft suggests that the N-Trig digitizer would provide a non-infringing
alternative, the N-Trig digitizer was not commercially available before recently in December 2007, or
before the damages period presented by Lucent at trial. (2/28/08 Tr. at 220:24-221:12)
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95:11-22) Further, Windows XP Tablet PC Edition software is not a staple article of commerce, and
has no use other than to be installed on a Tablet PC and used in an infringing manner. Id. Therefore,
regardless of whether Tablet PCs may use other gestures, there are no substantial non-infringing uses
for Windows XP Tablet PC operating system, as the normal and intended use necessarily involves the
tap and double-tap gestures.22 Id.
C. This Court's Jury Instruction on Means-Plus-Function Infringement was Correct
and Microsoft is Not Entitled to a New Trial.
Microsoft challenges this Court's means-plus-function jury instruction, which states that "[i]f
you find that the structure in the accused product embraces technology developed after the issuance
of the patent, that structure still may be an equivalent to the structure I have defined as being
described in the patent under the doctrine of equivalents." See, e.g., Al-Site Corp. v. VSI Int'l, Inc.,
174 F.3d 1308, 1320 n.2 (Fed. Cir. 1999). At trial, however, Microsoft expressly agreed with that the
Court's statement of the law and Microsoft has never—including in its brief (MB at 42-43)—argued
otherwise. (3/26/08 Tr. at 224:13-16; 225:18-22)
Rather, the defendants have argued—and Microsoft now reargues—that this Court's Order
granting Microsoft's Motion in Limine No. 13 in connection with the originally scheduled trial on the
Agulnick '295 patent precludes a finding of infringement under the doctrine of equivalents.
Microsoft further argues that it "relied on this ruling in preparing for and presenting its case at trial"
and therefore it was prejudiced by the Court's instruction. (MB at 42) Microsoft's argument distorts
the history of this issue and any alleged prejudice. It was the defendants—not Lucent—who
attempted at trial to interject a previously undisclosed theory, alleging that the accused products
embody "after-arising technology." In its motion for judgment as a matter of law at the conclusion of
Lucent's case, Microsoft argued—for the very first time—that some of the structures identified by
Lucent's expert in the accused products as meeting means-plus-function elements in the Agulnick
'295 patent were "after-arising technology." [D.I. 619-1 at 9-10] As a result, the defendants argued
22 Microsoft again argues that software is not a component under 35 U.S.C. § 271(c). (MB at 42
n.25) As discussed above, however, Microsoft misstates the law. See supra Section III.B.4.c. The
Supreme Court, the Federal Circuit, and other courts have held that software is a component under
§ 271(c). Id.
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that there can be no literal infringement, and infringement may be considered only under the doctrine
of equivalents. This Court's Order on Microsoft's earlier Motion in Limine was based on Microsoft's
argument that Lucent's expert had not addressed the doctrine of equivalents in his expert report. But
no reason existed for Lucent's expert to have addressed the doctrine of equivalents in his report, as
the issue of after-arising technology had never been raised by defendants. Because Microsoft was
permitted to make its after-arising technology argument at trial, the Court properly concluded that it
must instruct the jury on the consequences of that argument.
Microsoft, on the other hand, was in no way prejudiced by the Court's instruction allowing the
jury to consider the doctrine of equivalents for the means-plus-function elements of the Agulnick '295
patent. Microsoft was free to argue—and did argue—that Lucent's expert relied on after-arising
technology to show that the accused products met the means-plus-function elements of the asserted
claim. The Court did not preclude that argument; it merely instructed the jury on the doctrine of
equivalents issue interjected into the case by the defendants' "after-arising technology" argument.
Finally, the test for doctrine of equivalents and structural equivalents under § 112, ¶ 6 is the same
(i.e., whether there are insubstantial differences). Chiuminatta 145 F.3d at 1310; Kemco Sales, Inc. v.
Control Papers Co., 208 F.3d 1352, 1364 (Fed. Cir. 2000). Thus, evidence adduced in support of or
in opposition to infringement under one theory would be the same evidence necessary to support or
oppose the other. Because structural equivalents under § 112, ¶ 6 has always been in the case, both
parties prepared and presented evidence regarding insubstantial differences between the accused
structure and the structure disclosed in the patent. Microsoft therefore was not prejudiced by the
Court's instruction.
D. Mr. Ward Did Not Testify Beyond His Expert Report and Microsoft is Not
Entitled to a New Trial.
Lucent's technical expert, Mr. Jean Renard Ward, spent "2-1/2 to three days full-time"
analyzing the accused Microsoft source code in this case. (MX 25, 6/15/06 Ward Dep. Tr. at
123:25-124:5) Mr. Ward's expert report on infringement of the '295 patent contains not only the
opinions set forth at trial, but also all the bases for those opinions, including his extensive source code
analysis. (MX 24, 3/31/06 Ward Report at 36-37, 47-48, Tab 2) Indeed, Mr. Ward's report
specifically identifies and analyzes the very source code module "taps.c" that contains recognition
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code for the Windows Tablet PC tap gesture, the very analysis about which Microsoft now
complains. Despite being on notice of Mr. Ward's source code analysis, Microsoft failed to examine
him on that analysis during his deposition. (MX 24, 3/31/06 Ward Report at 47-48)
Microsoft's statement that Mr. Ward allegedly confirmed during his deposition that he did not
perform certain source code analysis is simply false and misleading. (MB at 43 citing Ward Dep. Tr.
at 9:22-10:9) The testimony Microsoft cites is not about the Tablet PC product accused at trial, but
rather a discussion about the Pocket PC and Mobile PC products, which were not at issue during trial.
(MX 25, 6/15/06 Ward Dep. Tr. at 9:4, 10:3-6)
Moreover, Mr. Ward's trial testimony regarding the Tablet PC tap gesture and whether it
performs the same executable commands at both the operating system and the application level as
required by the Court's construction is also set forth in his expert report. (MX 24, 3/31/06 Ward
Report at 39-40) Microsoft asked Mr. Ward about this very opinion during his deposition:
Q. So the tap command would not satisfy -- excuse me, the tap gesture would not
satisfy the identical executable commands language in the court's interpretation, do
you agree with that?
A. No, I do not.
(MX 25, 6/15/06 Ward Dep. Tr. at 198:15-20) Microsoft's suggestion that Mr. Ward's report and
deposition testimony were inconsistent with his trial testimony therefore lacks merit.
E. Microsoft is Not Entitled to a New Trial Based On This Court's Claim
Construction.
After several days of argument, this Court determined that the algorithms, well-known to
those skilled in the art, such as the algorithms described in "Automatic Recognition of Handprinted
Characters—The State of the Art" Proceedings of the IEEE, pages 469-487, Vol. 68, No. 4, April
1980 ("the IEEE Disclosure"), may be considered as part of the structure corresponding to the "means
… for recognizing [and] comparing" gestures. (PX 6 at 4) Contrary to Microsoft's assertions, that
ruling was not legal error.
Microsoft misapplies the long-standing rule that where a specification fails to disclose any
corresponding structure, it may not satisfy the definiteness requirement and avoid invalidity by
incorporating structure by reference. Atmel Corp. v. Information Storage Devices, Inc., 198 F.3d
1374, 1381 (Fed. Cir. 1999) ("incorporation by reference cannot be substituted for a disclosure in the
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specification"); see also Budde v. Harley Davidson, Inc., 250 F.3d 1369, 1382 (Fed. Cir. 2001)
(recognizing that Atmel "held that the patentee could not incorporate the disclosure of the cited article
by reference to fulfill the definiteness requirement"). Here, however, it is not the case that the
specification fails to disclose any corresponding structure. (PX 1 at 4:41-46)
Microsoft's "incorporation by reference" argument misstates the law. The Atmel and Default
Proof decisions make clear that the critical inquiry is "first, whether structure is described in the
specification, and, if so, whether one skilled in the art would identify the structure." See Atmel, 198
F.3d at 1381 (second emphasis in original); Default Proof Credit Card Sys., Inc. v. Home Depot
U.S.A., Inc., 412 F.3d 1291, 1301 (Fed. Cir. 2005). Here, there is no question that both the '295
patent specification and the prosecution history reference certain well-known methods of gesture
recognition, and cite the IEEE Disclosure as providing examples. (PX 1 at 4:41-46, PX 13, 5/26/92
response at 9) Lucent's expert recognized this, and he compared well-known gesture recognition
techniques in the IEEE Disclosure to those used in the accused products. (MX 24, see e.g., 3/31/06
Ward Report at 36, 47, 52)
Microsoft also ignores a long line of Federal Circuit cases making clear that the patent
specification does not need to "explicitly" describe every detail about the corresponding structure.
See, e.g., Atmel, 198 F.3d at 1380. "Rather, disclosure of structure corresponding to a
means-plus-function limitation may be implicit in the written description if it would have been clear
to those skilled in the art what structure must perform the function recited in the means-plus-function
limitation." Id. (emphasis in original) The Federal Circuit has emphasized this point, especially with
respect to well-known or well-understood structures.23 In other words, so long as the specification
23 Intel Corp. v. Via Techs., Inc., 319 F.3d 1357, 1366 (Fed. Cir. 2003) (mere disclosure of "core
logic," without specific disclosure of circuitry, was well-understood and sufficient disclosure); Creo
Prods., Inc. v. Presstek, Inc., 305 F.3d 1337, 1347 (Fed. Cir. 2002) (a way of rotating cylinders by
"conventional means" was well-known in the art and sufficient disclosure of corresponding
structure)(emphasis omitted); Budde, 250 F.3d at 1382 (Fed. Cir. 2001) (mere disclosure of a
"vacuum sensor" was well-known in the art and sufficient disclosure of corresponding structure); S3
Inc. v. NVIDIA Corp., 259 F.3d 1364, 1369-70 (Fed. Cir. 2001) (mere disclosure of a "selector" was
sufficient structure disclosure such that one of ordinary skill would understand it); Atmel Corp., 198
F.3d at 1382 (disclosure of the title of an article alone was sufficient to indicate the structure to one of
skill in the art); In re Dossel, 115 F.3d 942, 946 (Fed. Cir. 1997) (the disclosure of "known
(Continued…)
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discloses some corresponding structure, the knowledge of one of skill in the art can be called upon to
"flesh out" the understanding of the structural reference. See Creo Prods., Inc. v. Presstek, Inc., 305
F.3d at 1337, 1347 (Fed. Cir. 2002). Here, the '295 patent clearly discloses well-known gesture
recognition techniques, including those in the IEEE Disclosure. (PX 1 at 4:33-48)
After the numerous days of Markman hearings on the '295 patent, the Court also correctly
construed the "second detecting means" and "means for defining termination" terms as well. (PX 6 at
3-4) The Court's construction correctly cites the various methods for detecting termination set forth
in the '295 patent as ways for detecting termination of a gesture. (Id. citing '295 Patent at 1:65-2:5)
Mr. Ward correctly followed the Court's construction and relied on, e.g., the pen up and timeout
methods of termination in his infringement analysis. Because this Court's claim construction is not
erroneous, Microsoft should not be granted a new trial.
V. SUBSTANTIAL EVIDENCE SUPPORTS THE JURY'S LUMP-SUM DAMAGES
AWARDS.
Faced with the choice of awarding a lump-sum or a running royalty, the jury chose to award a
lump sum as advocated by Microsoft. The amount awarded by the jury falls squarely within the
range of the evidence presented at trial, which could have supported significantly higher lump-sum
damages. Although Microsoft picks and chooses among the contested facts in order to challenge the
verdict, it simply ignores substantial evidence from which the jury could reasonably have reached the
result it did. Because the jury's damages verdict is supported by substantial evidence, the Court
should deny Microsoft's motion for a judgment as a matter or law, a new trial or remittitur.
A. Substantial Evidence Supports the Jury's Damages Verdict.
Upon a finding of infringement, the law prescribes the award of damages adequate to
compensate the patentee for infringement, but in no event less than a reasonable royalty. 35 U.S.C.
§ 284. The amount of damages based on a reasonable royalty is an issue of fact, Micro Chem., Inc. v.
Lextron, Inc., 317 F.3d 1387, 1394 (Fed. Cir. 2003), and a jury's award is entitled to deference.
Monsanto Co. v. Ralph, 382 F.3d 1374, 1383 (Fed. Cir. 2004). The jury's damages award "must be
upheld unless the amount is grossly excessive or monstrous, clearly not supported by the evidence, or
algorithms" that were well-known in the art was sufficient disclosure).
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based only on speculation or guesswork." Brooktree Corp. v. Advanced Micro Devices, Inc., 977
F.2d 1555, 1580 (Fed. Cir. 1992) (internal quotation marks omitted). A court is not at liberty to
supplant its own judgment on the damages amount for the jury's findings. See id. Nor is the jury
bound to accept a rate proffered by one party's expert; rather, the jury may choose an intermediate
royalty rate that differs from the parties' respective positions. See Fuji Photo Film Co., Ltd. v. Jazz
Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005) ("[T]he jury is not bound to accept a rate
proffered by one party's expert but rather may chose an intermediate rate."); SmithKline Diagnostics,
Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1167 (Fed. Cir. 1991) ("[T]he factual determination of a
reasonable royalty, however, need not be supported and indeed, frequently is not supported by the
specific figures advanced by either party.")
At Microsoft's last-minute insistence, the Special Verdict form was amended to provide the
option of lump-sum damages for infringement of the Day '356 patent. The jury chose to use that
lump-sum damages option. The jury had before it a wide range of evidence supporting damages at
starkly varying magnitudes, as suggested by each party's damages expert. For the Day '356 patent, at
the lower boundary, Microsoft's expert suggested a lump sum of $6,500,000. In contrast, Lucent's
expert opined that in a hypothetical negotiation between the parties they would have agreed on a
running royalty of 8% applied to the retail selling price of the accused software. The jury did not
award the specific figure advocated by either expert, but instead chose an intermediate figure―and
the evidence fully supports the jury's conclusion to award that intermediate royalty.
Abundant record evidence supports the jury's damages award for Microsoft's infringement of
Day '356 patent. As Microsoft recognized in its opening brief, both damages experts recognized that
there were no licenses specifically to the Day '356 patent, thus the reasonable royalty determination
resulted in an analysis of comparable licenses. (3/12/08 Tr. at 52:3-11; 3/25/08 Tr. at 205:12-16)
Numerous lump-sum agreements for patent rights to comparable technology were presented in
evidence, ranging from royalty payments of $80 million to $290 million. (See, e.g., PX 5142, 5150,
5151, 5152) Each of those agreements were cross-license agreements and were the product of
real-world negotiations. The jury could have adjusted those representative lump-sum royalties
upward to reflect the value of the cross-license and to account for the assumption of validity and
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infringement required for the hypothetical negotiation—an assumption which both parties' expert
agreed would have an upward influence on the royalty. (3/11/08 Tr. at 166:16-25, 194:21-195:18;
3/25/08 Tr. at 225:6-14) The jury could reasonably conclude as a factual matter in light of these
real-world negotiations that the jury's substantial award reflects the amount Microsoft would pay for
the Day '356 patent in light of the undisputed evidence of tens of millions of sales of the three
infringing Microsoft products. (3/13/08 Tr. at 160:1-180:7)
The jury also heard extensive evidence of running royalties that provide additional support for
the jury's lump sum damages award. Lucent's licensing expert, Roger Smith, testified based on
Lucent's licensing policies, Microsoft's licensing policies, and license agreements in evidence that the
appropriate reasonable royalty for Microsoft's infringement would be 8% applied to the retail selling
price of the accused software. (3/12/08 Tr. at 45:10-52:19; PX 5140, 5141, 5172) Mr. Smith
testified that this rate was supported by the evidence of the pervasiveness of the use of the patented
invention in Microsoft's products and evidence of commercial importance and high profitability of
the accused products. (3/12/08 Tr. at 53:2-61:21, 65:13-69:13, 76:2-10, 77:3-13, 81:25-82:22; PX
250) Thus, Mr. Smith's testimony itself provided substantial evidence in support of the jury's award.
In fact, Mr. Smith's 8% royalty on the base of the retail selling price of the software would
have produced a substantially larger damages award—more than $500 million. (3/13/08 Tr. at
186:1-21) In reaching its damages award, the jury could have adjusted Mr. Smith's royalty rate or it
could have adjusted the royalty base. For instance, the jury could have concluded that Lucent was
only entitled to a portion of the selling price of the software to reflect the value of the patented
invention and adjusted the royalty base accordingly based on its own observation at trial of the
infringing features of the software.
Alternatively, the jury could have applied a royalty rate lower than the 8% suggested by
Mr. Smith. Lucent presented evidence of an agreement between Lucent and Acer around the time of
the hypothetical negotiation that provided for a 2% royalty on the base of the fair market value of the
patented portion. (PX 5183; 3/11/08 Tr. at 218:20-219:6) The jury could have utilized this rate or
adjusted the rate upwards based on Mr. Smith's testimony that the patent is assumed valid and
infringed, that the Acer agreement was a settlement, that the rate was a commuted rate, and that the
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Acer agreement also included a cross-license back with value to Lucent. (3/11/08 Tr. at 166:16-25,
194:21-195:18, 204:5-17, 216:3-218:3, 218:20-219:22; 3/12/08 Tr. at 49:15-50:11; PX 5183)
The jury also heard substantial evidence of other royalty rates for PC-related patents,
including individual per-unit rates varying from $1.50 to $2.00. (PX 5247) The jury could have
considered those real-world rates and adjusted upward because they are commuted rates and/or to
account for the assumption of validity and infringement. (3/11/08 Tr. at 194:21-195:18,
210:15-211:1; 3/12/08 Tr. at 16:18-17:25) Numerous license agreements related to the PC industry
with per-unit rates were also entered in evidence. (See PX 5183, 5189, 5190) Again, the jury could
have adjusted these rates based on Mr. Smith's testimony that these rates are commuted rates, were
agreed to in a real-world negotiation, and reflect a cross-license. (See 3/11/08 Tr. at 166:16-25,
194:21-195:18, 220:15-221:16) The jury also heard evidence of Microsoft's own agreement to pay
per-unit rates as high as $4 on sales of its computer software at the time of the hypothetical
negotiation. (3/11/08 Tr. at 233:21-234:17, 235:7-12; PX 5105)
The jury also heard evidence concerning Lucent's 1% per patent policy and the value of a
cross-license. (3/11/08 Tr. at 200:18-201:3, 202:2-14, 203:10-20; 3/12/08 Tr. at 15:1-21; PX 5137,
5139, 5140, 5141) As the jury heard, application of that Lucent licensing policy would yield a
royalty of approximately $10 per unit. (3/11/08 Tr. at 204:18-205:1) That evidence, including the
testimony of Mr. Smith, Lucent's licensing policies, license agreements, and evidence that the entire
computer system was the infringing device, also provided a point of reference as to the reasonable
royalty resulting from the hypothetical negotiation.
With respect to the Agulnick '295 patent, the jury was provided with the opportunity to
identify the royalty rate used in calculating its award. The jury declined to do so. But Microsoft
continues to engage in speculation as to how the jury reached its lump-sum damages award.
Regardless of how the jury reached this exact amount, the amount awarded by the jury is supported
by substantial evidence presented at trial. As discussed in more detail below, the jury's verdict is
supported by the testimony of Mr. Smith and the evidence Lucent presented at trial regarding the
proper amount of damages for the Agulnick '295 patent. And, as discussed in detail above, evidence
of numerous rates for comparable technology was presented at trial that the jury could have applied
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in reaching its damages verdict.
In addition, Microsoft's damages expert Brian Napper specifically mentioned two agreements
during the course of his testimony. (DX BCH, BCI) One agreement was a patent cross-license
agreement between Lucent and Casio wherein Casio paid Lucent a balancing payment of
$10,000,000 for comparable technology. (3/25/08 Tr. at 186:18-187:12) The other was a patent
cross-license agreement between Microsoft and Silicon Graphics. Mr. Napper testified that
Microsoft paid $30,000,000 for rights to two Tablet PC patents; he attributed $15,000,000 for a
patent license to a single patent. (3/25/08 Tr. at 206:6-20) Both of those lump-sum agreements
provide support for the jury's damages award.
The jury might properly have relied on any of this evidence in support of its award,
considering it in light of common sense and its own experience. See Georgia-Pacific Corp. v. United
States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970); 35 U.S.C.§ 284 ("The court may
receive expert testimony as an aid to the determination of damages or of what royalty would be
reasonable under the circumstances.") Each party's expert supported his reasonable royalty
determination with an analysis of relevant factors based on his view of the disputed facts. The jury
ultimately chose its conclusion between the amounts proposed by each party's expert, and the record
provides ample factual support for the jury's conclusion. The jury was instructed on the factors set
forth in Georgia-Pacific for determination of a reasonable royalty and the record contains substantial
evidence regarding the infringing features and evidence of the importance of the patented invention
to the accused products. Because the record contains "sound economic and factual predicates" to
support the jury's lump-sum damages award, the Court should deny Microsoft's motion.24
B. The Entire Market Value Rule Does Not Justify Granting JMOL or New Trial on
the Jury's Damages Verdict.
1. The Entire Market Value is Not Applicable in This Case.
As discussed above, the jury may have based its lump-sum damages awards on a number of
different factual predicates, any of which provides ample support for the jury's conclusion. As a
result, it is unclear whether the jury's lump sums were derived from a running royalty at all, and if they
24 Microsoft's contentions regarding the derivation of the jury's award is pure speculation. None of
Microsoft's musings match the jury's conclusion.
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were, whether the jury applied some rate to the selling price of the complete software products or to
just some portion of it. Despite that wealth of potential bases for the jury's verdict, Microsoft
challenges the award based on the entire market value rule.
With respect to the Day '356 patent, not only is it unclear whether the jury based its award on
the complete software product, Lucent's damages theory presented at trial does not require application
of the entire market value rule. As detailed in his trial testimony, Mr. Smith's suggested royalty for
the Day '356 patent used only the accused software products as the royalty base.25 Despite arguing
previously that the proper royalty base should be software, (see, e.g., MX 7, Microsoft's Motion in
Limine No. 4 Audio Coding Trial), Microsoft now suggests that the proper royalty base should be
something else again―some undefined, non-functional snippet of the unitary commercial product as
sold.26 But as Mr. Smith recognized, Lucent's technical expert testified that it is the normal usage of
the entire accused software programs that infringes the patents. (See, e.g., 2/27/08 Tr. at
102:17-103:19, 136:7-137:11, 161:21-162:3, 181:6-14; 3/12/08 Tr. at 53:7-15) Mr. Tognazzini did
not opine that the infringement is limited to some portion of the software; rather, he testified that the
infringement is embodied in the entire software program as incorporated on a computer system and
that the infringement is central to the operation of the accused products. Thus, the entire market value
rule simply has no application to the royalty suggested by Mr. Smith, because it encompassed only the
smallest commercially sold piece of the infringing product (the accused software) rather than the
entire functional infringing system. See State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573,
1579-81 (Fed. Cir. 1989) (entire market value rule potentially implicated only where royalty base goes
beyond the infringing product).27
25 Contrary to Microsoft's contention, Lucent has never conceded that a reasonable royalty on a base
of the entire computer system violates the entire market value rule. In any event, contrary to
Microsoft's assertion, Mr. Smith's 8% theory is not "simply a sleight of hand to achieve the same
result"—the application of the 8% rate to the software product results in a much lower reasonable
royalty than application of the 1% rate to the computer system.
26 Microsoft's damages expert Brian Napper did not present an alternative base..
27 Indeed, one District Court has already rejected Microsoft's argument that the software cannot be
the royalty base simply because it bundles numerous features into a unitary infringing product:
Microsoft argues against the validity of any damage calculation wherein the value of a complex,
(Continued…)
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Similarly, with respect to the Agulnick '295 patent, the entire market value rule is also not
implicated where the patentee does not seek royalties on a base beyond the actual infringing product.
See Slimfold Mfg. Co. v. Kinkead Indus., Inc., 932 F.2d 1453, 1458-59 (Fed. Cir. 1991) (upholding
district court damages award of 0.75% on the base of the entire product covered by the claims); State
Indus., 883 F.2d at 1579-81. As Mr. Ward, Lucent's technical expert for the Agulnick '295 patent
testified, it is the entire tablet PC that infringes. (See, e.g., 2/28/08 Tr. at 190:7-12, 191:6-12,
212:6-22) Mr. Smith relied on this testimony in determining that the proper royalty base is the entire
tablet PC. (3/12/08 Tr. at 29: 21-30:19, 33:18-34:3) Furthermore, Mr. Smith recognized that
Microsoft would be standing in the shoes of its customers, like Dell, who sell the entire tablet PC and
thus would pay a royalty on the entire system. (3/12/08 Tr. at 41:24-44:5) Thus, the entire market
value rule has no application to Mr. Smith's opinion of the royalty base for the Agulnick '295 patent.
In addition, the Georgia-Pacific analysis itself provides an independent basis for a finding
that a hypothetical negotiation would have resulted in a royalty base larger than a particular portion
of an infringing product specifically addressed by the patent at issue. For instance, the
Georgia-Pacific factors explicitly recognize, and give weight to, the patentee's licensing policies and
practices, licensing practices in the industry, convoyed sales, and even the value to be credited to the
invention as distinct from non-patented elements. Georgia-Pacific, 318 F. Supp. at 1120 (listing as
relevant to the reasonable royalty factors 4, 6, 12 and 13). Similarly, depending on industry
circumstances, a reasonable royalty can be based on something other than, or in addition to,
infringement alone. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 138
multi-functional product is the base from which a percentage is extracted-the percentage being
the commercial value of a single infringing functionality. . . . [T]he bundling makes it very
difficult for either party to assess the value of each individual component. Since Microsoft has
created this difficulty for itself, it must bear the legal risks attendant to its way of business. At
times, Microsoft's arguments seemed to border on proposing that an infringer could wrap
together, in a single product, 150 technological innovations without having to any [sic] pay a
cent in royalties so long as each innovation contributed only a small part of the product's overall
value and was not itself a standalone product. But, few would be willing to adopt this position
explicitly.
Eolas Techs. Inc. v. Microsoft Corp., No. 99 C 0626, 2004 WL 170334, at *2 (N.D. Ill. Jan. 15,
2004).
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(1969) (recognizing that the parties may find it convenient to base royalties on total sales rather than
face the burden of figuring royalties on actual use); Hanson v. Alpine Valley Ski Area, Inc.,718 F.2d
1075, 1080 (Fed. Cir. 1983) (basing royalty on estimated cost savings rather than actual usage);
Snellman v. Ricoh Co., Ltd., 862 F.2d 283, 289 (Fed. Cir. 1988) (upholding award of damages of a
lump-sum royalty payment based on expected sales). The Federal Circuit has held the jury is entitled
to rely on evidence of bundling and convoyed sales in determining the proper scope of the royalty
base. See Interactive Pictures Corp. v. Infinite Pictures Corp., 274 F.3d 1371, 1385 (Fed. Cir. 2001).
Here, Mr. Smith, a licensing expert with decades of licensing experience in the computer
industry, testified―based on Lucent's licensing policies and practices, as well as industry practice
and the license agreements entered in evidence―that the proper royalty base is the accused software
programs for the Day '356 patent, (3/11/08 Tr. at 178:23-180:12, 194:1-197:20; 3/12/08 Tr. at
45:10-18; PX 5125, 5137, 5139, 5140, 5141, 5172, 5456), and is computers running the accused
software for the Agulnick '295 patent. (3/11/08 Tr. at 178:23-180:12, 194:1-197:20; 3/12/08 Tr. at
29:21-30:19, 31:16-24; PX 5125, 5137, 5139, 5140, 5141, 5172, 5456) Those conclusions, rooted in
the industry's actual practice and the hypothetical negotiation itself, are entirely independent from any
reliance on the entire market value rule.28 See Georgia-Pacific, 318 F. Supp. at 1120; see also
Hanson, 718 F.2d at 1079, 1080 (finding expert testimony "credible and convincing" regarding "the
basis upon which a willing licensor and a willing licensee would have negotiated a license").
2. Even Under Proper Application of the Entire Market Value Rule,
Substantial Evidence Supports Use of the Accused Software and
Computer System as the Royalty Base.
To the extent Microsoft interprets the entire market value rule to require that the accused
feature must be the sole basis for consumer demand of the larger product, Microsoft is wrong. The
Federal Circuit has routinely applied the entire market value rule where the patented component is not
the sole basis for the customer demand. Rather, the proper test examines two interrelated factors: (1)
whether there is a functional relationship between the patented and unpatented components and (2)
28 This case is distinguishable from the arguments made by the patentee in Imonex Services, Inc. v. W.
H. Munzprufer Dietmar Trenner GMBH, 408 F.3d 1374, 1379-80 (Fed. Cir. 2005). Here, unlike in
Imonex, Mr. Smith's opinion is based on the industry licensing practice and numerous real-world
license agreements and therefore relates to the Georgia-Pacific factors.
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whether the patented feature contributes substantially to customer demand. Lucent Techs. Inc. v.
Microsoft Corp., Case No. 06-CV-0684-H (CAB), Docket No. 347; Bose Corp. v. JBL Inc., 274 F.3d
1354, 1361 (Fed. Cir. 2001); see also Juicy Whip, 382 F.3d at 1371-73; Tec Air, Inc. v. Denso Mfg.
Mich. Inc., 192 F.3d 1353, 1362 (Fed. Cir. 1999). Thus, even were it applicable, the entire market
value rule may be satisfied by evidence that the patented features contributed to the demand for the
accused software products or computer system.
In connection with the Day '356 patent, as Mr. Tognazzini testified, and Mr. Smith
recognized, the accused features are central and material to each of the accused software programs
and are promoted by Microsoft. (2/27/08 Tr. at 102:17-111:2, 136:7-145:3, 161:21-170:8,
181:6-185:11; PX 501, 626, 627, 628, 629, 647, 648, 649, 650, 651, 652, 654, 665, 678, 742, 971,
972, 1121B, 1124B, 1129B, 1138B, 1139B, 1144B, 1145B, 1145C, 1154B, 1154C, 1218, 1507,
1505, 5546; 3/12/08 Tr. at 53:7-15) Mr. Smith did not concede that the accused features were not
central to the products on cross-examination, as Microsoft contends; instead, Mr. Smith confirmed
that the patented features are necessarily implicated in use of the software, such as use of the
calendaring feature in the accused Microsoft Outlook software program. (See, e.g., 3/12/08 Tr. at
133:24-134:11)29 And, when shown the "date picker" during cross-examination, Mr. Smith testified
regarding the advantages of being able to see the calendar to pick a date as opposed to using other
tools to enter a date. (3/12/08 Tr. at 142:17-21)30 The jury also heard substantial additional evidence
of the commercial importance of the patented features to the sales of the software and the customer
29 Even Microsoft's expert conceded that the accused feature in Outlook appears multiple times and is
not only found in the calendaring function, but also in tasks and journals. (3/25/08 Tr. at 203:12-17)
30 Mr. Smith never testified "that he had not analyzed the non-patented functionality within the
accused programs, despite being obligated by the Georgia-Pacific factors to do so." (MB at 25) The
Georgia-Pacific analysis does not require Mr. Smith perform a detailed analysis of each alleged
non-patented functionality within Microsoft's accused software programs and the jury was not
required to engage in such an analysis in determining its damages award. (See Jury Instruction No.
44 at 1 ("I will list for you a number of factors you may consider. This is not every possible factor,
but it will give you an idea of the kinds of things to consider in setting a reasonable royalty."); at 3
("13. The portion of the profit that is due to the patented invention, as compared to the portion of the
profit due to other factors, such as unpatented elements or unpatented processes, or features or
improvements developed by the defendants.") Indeed, Mr. Smith testified that he was aware of the
other features of Outlook (3/12/08 Tr. at 133:13) and focused his analysis on the fact that the patented
invention was an important aspect of the Outlook program. (Id. at 135:10-12)
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demand for the software due to the patented features. (2/27/08 Tr. at 52:2-59:9; 3/12/08 Tr. at
53:7-61:24, 65:13-69:13; PX 246, 248, 250, 253, 5158, 5163) Based on its own experience and the
abundant evidence about the infringing features, the jury was also free to conclude that the patented
features were commercially important.
With respect to the Agulnick '295 patent, as Mr. Ward testified, a purchaser of a pen-based
tablet PC demands the inventions of the Agulnick '295 patent to make stylus-based computing a
reality. (See, e.g., 2/28/08 Tr. at 186:16-187:19, 237:18-238:11) Mr. Smith also presented
substantial evidence of the commercial importance of the patented features to sales of tablet PCs and
customer demand for tablet PCs because of the patented features. (3/12/08 Tr. at 33:12-44:19; PX
5206A) Finally, the jury was free to make its own evaluation of the infringing features and based on
its own experience and the evidence presented, could properly have concluded that the patented
features were commercially important. Thus, to the extent the entire market value rule is implicated,
the jury heard sufficient evidence to support the damages award.
C. Damages for the '356 Patent Should Not Be Limited to the Extent to Which
Lucent has Demonstrated Specific Instances of Infringement.
For purposes of establishing indirect infringement liability, it is settled law that circumstantial
evidence is sufficient to establish the required connection between sales and direct infringement. See
Symantec Corp. v. Computer Assocs. Int'l, No. 2007-1201, -1239, slip op. at 17, 522 F.3d 1279 (Fed.
Cir. Apr. 11, 2008); Moleculon, 793 F.2d at 1272; Black & Decker v. Bosch, No. 04 C 7955, 2006
WL 3883286, at *3 (N.D. Ill. Dec. 18, 2006) (including instructions on how to operate in an
infringing manner was sufficient to uphold the jury's determination that the product was used in an
infringing manner). As discussed above, Lucent presented substantial evidence that the users of the
accused products had performed all of the steps of the claimed method. However, because proof of a
one-to-one correspondence between units sold and directly infringing customers is not required to
prove liability, applicable Federal Circuit law does not require that damages be limited to specific
proven instances of direct infringement. See Philips Elecs. N. Am. Corp. v. Contec Corp., 177 F.
App'x 981, 988-89 (Fed. Cir. 2006); Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 1
F. App'x 879, 884 (Fed. Cir. 2001); Black & Decker, 2006 WL 3883286, at *2; Hilgraeve, Inc. v.
Symantec Corp., 272 F. Supp. 2d 613, 620-21 (E.D. Mich. 2003).
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In Philips Elecs., the Federal Circuit made clear that the Dynacore opinion (on which
Microsoft relies) does not require that damages for indirect infringement be limited to proven
instances of direct infringement. 177 F. App'x at 988-89. The Philips Elecs. Court upheld the jury's
calculation of damages where Philips argued that the reasonable royalty reached in the hypothetical
negotiation between the parties would have been based on an agreed upon number of total sales
rather than the difficult prediction of usage by individual customers. Id. The Court recognized that
even in the absence of survey evidence or expert testimony as to the percentage of units sold that
were actually used in an infringing manner, the jury could rely on its own personal experience and
common sense in determining the reasonable royalty damages. Id.
Similarly, Lucent is entitled to rely on circumstantial evidence to prove infringement, and
damages are not limited to specific instances of infringement. See Philips Elecs., 177 F. App'x at
988-89; Chiuminatta, 1 F. App'x at 884; Black & Decker, 2006 WL 3883286, at *3; Hilgraeve, 272
F. Supp. 2d at 621.31 As discussed above, substantial trial evidence establishes that Microsoft
instructs its customers to use the accused products in an infringing manner, and that the normal and
intended use of the accused products involves the use of the accused features and performance of the
claimed method. Ample evidence established Microsoft's indirect liability by encouraging others,
through tutorials, instruction, help files, web pages, and other materials, to use the accused products
in an infringing manner. That evidence is more than sufficient to establish infringing use of the
accused products and to support Lucent's damages claim.32
31 Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 418 F. Supp. 2d 1021 (S.D. Ind. 2006) (cited
by Microsoft and pre-dating Philips Elecs.) is inapposite. In that case, direct infringement required
the customer to modify the product in a particular way. Id. at 1040. But in this case the software
already embodies the patented method when it reaches the customers, and requires nothing more
from the user than to use the software without any further modification. See Philips Elecs., 411 F.
Supp. 2d at 475 (rejecting defendant's argument based on Dynacore where the accused device already
embodies the patented method).
32 In any event, the jury did not award Lucent the entire damages award sought. As the Federal
Circuit recognized in Philips Elecs., the jury could have relied on its own experience and common
sense in weighing the evidence of direct infringement and awarded damages accordingly.
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D. A Jury Award Based On an 8% Royalty for the '356 Patent is Supported by the
Evidence.
As discussed above, it is unclear whether the jury actually used an 8% royalty to reach its
lump-sum damages award, but even if it did, the record includes numerous real-world royalty rates
and lump-sums fully supporting that award. As Microsoft has recognized, there were no licenses
specifically to the Day '356 patent, thus resulting in an analysis by both experts of comparable
licenses. Based on decades of licensing experience in the computer industry and consistent with the
Georgia-Pacific methodology, Mr. Smith relied on Lucent's licensing policy and industry license
agreements for comparable technology in determining that 8% was the proper royalty rate to apply to
Microsoft's sales of the accused software. (3/11/2008 Tr. at 153:20-156:2, 175:20-176:10; 3/12/08
Tr. at 45:10-18) Mr. Smith testified and presented corroborating evidence that IBM's patent licensing
policy was widely adopted in the computer industry before the time of the hypothetical negotiation,
(3/11/08 Tr. at 184:17-187:14; PX 5125), and that Lucent adopted IBM's patent licensing policy.
(3/11/08 Tr. at 200:18-201:3, 202:2-14, 203:10-20; 3/12/08 Tr. at 15:1-17; PX 5137, 5139)
Mr. Smith also testified and presented evidence that the 8% policy was a part of IBM's licensing
practice and that a great number of computer manufacturers took licenses incorporating that rate.
(3/11/08 Tr. at 181:25-182:6; 187:15-189:11; PX 5172) As examples, Mr. Smith presented two IBM
licensing agreements with Dell and Gateway―two major players in the computer industry and
Microsoft customers―who took a license under IBM's policy at 8% of the fair market value of the
licensed information handling system product, which included software programs such as the accused
programs. (3/11/08 Tr. at 190:8-192:14; PX 5140, 5141)33
33 Contrary to Microsoft's argument, the IBM agreements are plainly probative of Lucent's position
at the hypothetical negotiation. Lucent adopted IBM's licensing policy. These agreements license
patents for use in computers and other information handling products like software. (See PX 5140;
PX 5141) Mr. Garrana's subjective opinion regarding the "fundamental" character of the IBM's
patents to making a computer was just one fact the jury could have considered in its analysis. As the
trial evidence established, infringement of the Day '356 patent requires a computer and the accused
software has no use other than to be installed on a computers. (3/12/08 Tr. at 45:23-46:9) The jury
heard evidence of Microsoft's intent to stand in the stead of its computer manufacturer customers, like
Dell and Gateway. Thus, those unilateral agreements—the type of agreement that results from the
hypothetical negotiation, unlike the subsequent Dell and Gateway IBM cross-licenses―are
particularly relevant to the damages analysis. (3/12/08 Tr. at 21:12-22:1, 23:11-25)
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In addition to the IBM agreements, evidence of the industry licensing practices and Lucent's
licensing policy, Mr. Smith presented evidence of the Lucent-Acer license agreement, which provides
a royalty of 2% of a patented portion of an infringing product. (PX 5183; 3/11/08 Tr. at
218:20-219:6) The Lucent-Acer agreement was a cross-license, was entered in to as a result of a
settlement, reflected a commuted rate, and was the result of a real-world license negotiation.
(3/11/08 Tr. at 166:16-25, 194:21-195:18, 204:5-17, 216:8-218:3, 218:20-219:22; 3/12/08 Tr. at
49:15-50:11; PX 5183) The jury could have found that the appropriate rate for the hypothetical
negotiation is higher than the 2% provided in the Lucent-Acer agreement as a result of those factors
and that the Lucent-Acer agreement is consistent with the IBM agreements and the 8% royalty
proposed by Mr. Smith. (3/11/08 Tr. at 166:16-25, 194:21-195:18) Because the evidence fully
supports a reasonable royalty rate of 8%, the Court should deny Microsoft's motion.
E. The Size of the Jury's Award for the '356 Patent is Not "Grossly Excessive"
Warranting Judgment as a Matter of Law, a New Trial or a Remittitur.
Microsoft argues that the damages awarded by this jury for the Day '356 patent are grossly
excessive. However, in relative terms, what the jury awarded is only a modest portion of the retail
selling price and the overall revenue generated by the tens of millions of infringing units sold. The
record in this case reveals that the jury was instructed in the factors set forth in Georgia-Pacific for
determination of a reasonable royalty and could have based its determination of a reasonable royalty
on the testimony of an expert witness who was cross-examined by Microsoft's attorney. Lucent's
expert, Mr. Smith, provided testimony regarding the reasonable royalty and considered all the
Georgia-Pacific factors in the context of the hypothetical negotiation. (3/11/08 Tr. at 192:15-193:9;
193:25-195:18; 195:24-198:6) Although Microsoft disagrees with the jury's conclusions, the record
evidence outlined above provides ample support for the jury's damages award. Because Microsoft
has failed to meet its burden of showing that "the award is, in view of all the evidence, either so
outrageously high or so outrageously low as to be unsupportable as an estimation of a reasonable
royalty," Monsanto, 382 F.3d at 1383 (citation omitted), the Court should deny Microsoft's motion.
VI. CONCLUSION
For the reasons given above, the Court should deny Microsoft's motions for judgment as a
matter of law, new trial, and remittitur.
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51 Case No. 07-CV-2000-H (CAB)
DATED: May 19, 2008
By:
KIRKLAND & ELLIS LLP
s/ Jonas R. McDavit
John M. Desmarais (admitted pro hac vice)
Robert A. Appleby (admitted pro hac vice)
Paul A. Bondor (admitted pro hac vice)
Jonas R. McDavit (admitted pro hac vice)
KIRKLAND & ELLIS LLP
153 East 53rd Street
New York, NY 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Gregory F. Corbett (admitted pro hac vice)
KIRKLAND & ELLIS LLP
655 Fifteenth Street, NW
Washington, DC 20005
Telephone: (202) 879-5000
Facsimile: (202) 879-5200
David A. Hahn (SBN 125784)
HAHN & ADEMA
501 West Broadway, Suite 1600
San Diego, CA 92101-3595
Telephone: (619) 235-2100
Facsimile: (619) 235-2101
Attorneys for Lucent Technologies Inc.
Case 3:07-cv-02000-H-CAB Document 809 Filed 05/19/2008 Page 60 of 60
