Do Not Pass Go, Do Pay Out $200 (Million) Dollars

i4i Limited Partnership v. Microsoft Corp.

In i4i Limited Partnership v. Microsoft Corp., the Federal Circuit reminds the patent litigation bar that there are just some squares in the patent law game that can't be skipped.  It turns out Rule 50 of the Federal Rules of Civil Procedure can have a monopoly on the successful appeal of patent infringement verdicts and the failure to move at trial.  Judgment as a Matter of Law (JMOL) under Rules 50(a) and 50(b) can determine just who wins - and who loses - on appeal.  In i4i the court rejected Microsoft's challenge to the legal sufficiency of the evidence supporting a $200 million patent infringement verdict against it.  Because Microsoft had failed to move for JMOL on the key legal issues for which it sought review, the Federal Circuit said it could not consider the legal sufficiency of the underlying evidence.  Rather, it reviewed the jury's factual findings in the light most favorable to verdict.  The result?  Microsoft's fact-based arguments went directly to denial, and the district court order awarding enhanced patent infringement damages was affirmed.

Microsoft sought to challenge the jury's determination that the patent at issue was not invalid.  Microsoft claimed that the prior art disclosed all of the claim limitations and also made arguments regarding the scope of the prior art and whether a person of ordinary skill would have been motivated to combine the prior art to arrive at the claimed invention.  However, Microsoft had not argued obviousness based on the prior art references in its JMOL motion on anticipation.  The Federal Circuit held the issues Microsoft raised on obviousness were questions of fact and said it was procedurally required to resolve those questions in i4i's favor because of the relevant standard of review.

Microsoft's failure to move for JMOL on the issue of damages similarly limited the success of its appeal on the reasonableness of the jury's damage award.  The Federal Circuit said "[a]sking whether a damages award is ‘reasonable,' ‘grossly excessive or monstrous,' ‘based only on speculation or guesswork,' or ‘clearly not supported by the evidence,' are simply different ways of asking whether the jury's award is supported by the evidence."  Noting that there may have been a different outcome had a motion for JMOL been made,  the court nevertheless affirmed the jury's award because there was at least some evidence to support it - satisfying the highly deferential standard of review accorded the jury's factual findings.

The Federal Circuit also commented on the impact recent significant patent law precedent had on its decision.  It said the burden of proof for invalidity remained clear and convincing evidence and that nothing in KSR changed that standard.  The court, therefore, rejected Microsoft's argument that it only needed to prove invalidity by a preponderance of the evidence because of how the patent was prosecuted at the PTO.  The court also addressed Microsoft's failure to obtain an opinion of counsel in light of Seagate, given the jury's determination of willful infringement and the district court's enhancement of damages.  The Federal Circuit said the lack of an opinion of counsel letter may properly be considered as one of a number of factors set out in Read to enhance damages once a determination of willfulness has been made - even though Seagate said such a failure, in and of itself does not support a finding of willfulness because an accused infringer has no affirmative duty to obtain the opinion.  Thus, i4i makes clear that once willfulness has been determined,  Read controls and the willfulness standard set forth in Seagate is not to be reapplied.  (Interestingly, the decision also creates the opportunity to argue that, under Read, a willful infringer who has obtained an opinion of counsel should not be subject to enhanced damages.)

Microsoft contains strategy lessons large and small.  Close in, the decision serves as a reminder of the importance of Rule 50 and its connection to the standard of review. To best preserve issues for appeal, litigants should habitually enter both pre-verdict Rule 50(a) and post verdict Rule 50(b) motions on all major issues unless there is a very compelling reason not to do so.  Microsoft also teaches the importance of knowing the rules before you roll the dice.  Patent litigation is a high-stakes game-when you can prevent it, the final decision should never end up in the hands of chance.

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