Recent Developments in Patent Damages Law in the United States

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Over the past two years, the United States Court of Appeals for the Federal Circuit has issued several decisions intended to clarify the law of damages for patent infringement in the United States. All indications point to this trend continuing in 2011. Indeed, just four days into the new year, the Federal Circuit issued what many consider to be its most significant decision on damages in at least a decade. This decision, Uniloc U.S.A., Inc. v. Microsoft Corp., did not just clarify existing law, it dramatically changed it. Although there is substantial debate among the patent community over whether the Uniloc decision is a significant improvement or an unfortunate step in the wrong direction, there is virtually unanimous agreement that it will change how patent infringement damages will be proven in future cases.

Uniloc’s patent relates to a software registration system that prevents “casual copying”—the unauthorized use of software by a person who has “borrowed” an authentic installation disk from a licensed user. In the mid-1990’s Microsoft, which was losing more than $3.5 billion per year to casual copying, developed “Product Activation,” an anti-piracy technology to prevent casual copying of its Windows and Office software products. Product Activation has been an enormous success for Microsoft, allowing Microsoft to generate billions of dollars in additional profits.

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