In June last year, a California judge upheld a jury's finding that Microsoft must pay Alcatel-Lucent more than $511 million in damages, after interest, for infringing Alcatel-Lucent's US patents 4,763,356 and 5,347,295.
The '356 patent relates to technology that allows users to choose a calendar date from a menu, while the '295 patent covers a "position-sensed stylus" to control a notebook computer.
Microsoft appealed the decision to the Federal Circuit, and is being supported by several amici in the software industry, including Apple, SAP and Oracle, who argue that the method of calculating damages in infringement cases is unfair.
They argue that the so-called entire market value rule, which allows a jury to determine reasonable royalties based on the entire market value of a product, rather than just the infringing component(s), is unfair and that the method for calculating damages should be more restrictive.
But the 13 amici now backing Lucent, including companies such as 3M, Johnson & Johnson, Procter & Gamble and GE, warn that changing the system could result in chaos.
The brief, authored by Erik Puknys of Finnegan Henderson Farabow Garrett & Dunner, said: "Dismantling the long-established framework for calculating reasonable royalties at trial could very well encourage infringers, and perhaps even existing licensees, to reject negotiated, market-based royalties in favor of pursuing a more favorable outcome in litigation. That is hardly a desirable outcome."
In an interview last year, Federal Circuit Chief Judge Paul Michel told Managing IP that he wrote several letters to Congress about the potential workload impact on the Court of patent reform proposals to change the method for calculating damages.
He said: "The damages provision would not allow the judge to tailor the damages methodology to the facts of the case. It would require a kind of analysis that would be extremely difficult to do as sketched out in the bill and would greatly increase the length of damages trials and greatly increase the difficulty on appellate review for deciding whether the damage calculation could withstand review or not, so it adds time and new complexity."
Michel also said that the damages provision as written at the time would add uncertainty, since many specifics were left out and it would be up to the courts to determine over time how to interpret the gaps.
According to Bingham McCutchen attorney Kurt Rogers' summary of data presented during a recent public hearing of the Federal Trade Commission on the evolving IP marketplace, "while median damages awards have remained fairly constant since 1995 (in 2008 dollars), damages awards have increased markedly over the last three years".
Rogers said that 30% of the 122 cases with awards greater than $10 million since 1995 have been in the last three years. Of the 22 cases with damages awards over $100 million, almost half of them were in the last three years, six of those in 2008 alone.
But the amici supporting Lucent claim that "damages awards have been largely consistent for more than a decade" and that "there is no need to abandon a body of law that has evolved...over nearly two centuries in favour of rigid rules with dubious justifications and unknown ramifications".
