Defendants argue that claim 32 of the ′471 patent and claims 44 and 131 of the ′825 patent are anticipated by Microsoft's Brazilian Publisher 1998 (“BP 98”) under 35 U.S.C. § 102(g)(2). Under § 102(g)(2), a patent is invalid for anticipation if
before such person's invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it. In determining priority of invention under this subsection, there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.
*4 Defendants contend that BP 98 was conceived and architected by June of 1997, before Colvin's conception date of September 1997 and before Colvin reduced his invention to practice by filing his patent application in June of 1998.
In order for BP 98 to anticipate the ′471 patent, Defendants must prove by clear and convincing evidence that BP 98 worked for its intended purpose. See
Medichem, S.A. v. Rolabo, S.L., 437 F .3d 1157, 1169 (Fed.Cir.2006). Considering the JMOL standard discussed above and the evidence presented at trial, a reasonable jury could have concluded that BP 98 did not work for its intended purpose, to stop piracy. See
Pl.'s Ex. 92, Pl.'s Ex. 558, 4/18/06 Tr. Trans. 75:17–76:8. Therefore, Defendants did not establish that the only reasonable conclusion on the issues of anticipation must be in their favor. Although Defendants have other arguments for why their motion for JMOL should be granted based on BP 98, the fact that a reasonable jury could have concluded that BP 98 did not work for its intended purpose prevents the Court from granting Defendants' motion.
At trial, Defendants also argued that Autodesk's AutoCAD R13 (“R13”) software anticipates claim 32 of the ′471 patent under 35 U.S.C. § 102(b) because it was offered for sale, sold, and used before June 4, 1997. Under 35 U.S.C. § 102(b), a patent is invalid for anticipation if the “invention was ... on sale in this country, more than one year prior to the date of the application for patent in the United States....” The critical date for the ′471 patent is June 4, 1997.
Defendants had to prove that R13 included every limitation of claim 32 of the ′471 patent in order to succeed on invalidity based on R13. See
Cooper v. Goldfarb, 240 F.3d 1378, 1382 (Fed.Cir.2001). Claim 32 of the ′ 471 patent requires “instructions for automatically contacting the authorized representative.” See
′471 Patent, col 12:1–2. The Court construed this phrase to mean “instruction (i.e. computer code) that enable a user's computer to contact the authorized representative.” Defendants argue that registration using email or a web browser constitutes a computer code for contacting the authorized representative. Although there were other arguments made at trial for why R13 did not anticipate claim 32 of the ′471 patent, based on the evidence presented at trial, a jury could reasonably conclude that R13 did not meet the “automatically contacting” limitation of the claim. Accordingly, Defendants' motion for JMOL cannot succeed on this basis.
Defendants further argue that Autodesk's AutoCAD R14 (“R14”) software anticipates claim 32 of the ′471 patent under § 102(b) because it was offered for sale and sold prior to June 4, 1997. As with Defendants' argument related to R13, Defendants had to prove that R14 met the “automatically contacting” limitation of claim 32. For the same reasons discussed above, a reasonable jury could conclude that R14 did not meet this limitation and Defendants' motion for JMOL cannot succeed based on this argument.
*5 Defendants argue that Autodesk's AutoCAD R13c4a New Zealand (“R13c4a NZ”) software anticipated claim 32 of the ′471 patent and claims 44 and 131 of the ′825 patent under § 102(g)(2) because it was conceived and reduced to practice in February 1997. As with Defendants' argument related to R13 and R14, Defendants had to prove that R13c4a NZ met the “automatically contacting” limitation of claim 32 to succeed on this issue at trial. Defendants contend that R13c4a NZ met the “automatically contacting” element of claim 32 of the ′ 471 patent because a user could provide registration information to Autodesk via email. Again, as with the R13 and R14, a reasonable jury could conclude that R13c4a NZ did not meet this limitation.
Defendants' expert used the term “electronic registration” recited in claims 44 and 131 of the ′825 patent interchangeably with the “automatically contacting” term in claim 32 of the ′471 patent. For the same reasons discussed above with regard to claim 32, a reasonable jury could have concluded that the “electronic registration” limitation of claims 44 and 131 of the ′ 825 patent were not met by R13c4a NZ. Accordingly, Defendants' motion for JMOL cannot succeed on these grounds.
Defendants continually argue that z4 did not directly dispute certain evidence that Defendants claim proved a particular element of their anticipation defense at trial. But Defendants, not z4, carried the burden of proof on anticipation at trial. Defendants were required to prove the elements of anticipation by clear and convincing evidence such that a jury could not be at liberty to disbelieve that the patents-in-suit were anticipated by prior art. See
Nobelpharma, 141 F.3d at 1065. Based on the evidence presented by Defendants and drawing all reasonable inferences in favor of z4, a reasonable jury could conclude that Defendants did not meet their burden and prove that either claim 32 of the ′471 patent or claims 44 and 131 of the ′825 patent were anticipated by the products discussed above.
Microsoft contends that z4 did not present sufficient evidence at trial to support the jury's finding of willful infringement against Microsoft. Willful infringement must be determined based on the totality of the circumstances. Knorr–Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1342–43 (Fed.Cir.2004). Willfulness must be proven by clear and convincing evidence. Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 510 (Fed.Cir.1990). Willfulness is a question of the infringer's intent as determined by the circumstances. Id.
Once a party has actual notice of another's patent rights, that party has an affirmative duty of care to determine whether or not he infringes. See
Imonex Servs., Inc. v. W.H. Munzprufer Dietmar Trenner GmbH, 408 F.3d 1374, 1377 (Fed.Cir.2005). There is no hard and fast per se
rule when it comes to determining willfulness. Rolls–Royce, Ltd. v. GTE Valeron Corp., 800 F.2d 1101, 1110 (Fed.Cir.1986). However, facts that are often considered in determining willfulness are whether the infringer deliberately copied the patentee's invention, whether the infringer investigated the scope of the patent and determined a good faith basis as to whether he was infringing or that the patents were invalid, and the infringer's behavior as a party to the litigation. Read Corp. v. Portec, Inc., 970 F.2d 816, 826–27 (Fed.Cir.1986). A patentee must present threshold evidence that an infringer's actions were willful. See
Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1332 (Fed.Cir.2004).
Microsoft argues that z4 did not present clear and convincing evidence of willfulness and argues that it presented evidence that it exercised sufficient due care to overcome a finding of willful infringement. Microsoft argues, among other things, that the only evidence of willfulness was the deposition testimony of Susan Cole (“Cole”), Microsoft's corporate representative. The portion of Cole's deposition that was read into the record at trial states:
*8 “Can you tell us the factual basis for noninfringement of the ′471 patent.
“Answer: I'm not in a position to say if we're infringing or not infringing. I believe that you have documents that lay out our stance on that.
“Question: That may or may not be true. The first part, if that's your answer, that you don't have an opinion, whether you're infringing or not infringing, I accept that.
“Answer: That's my answer.
“Question: For the ′825 patent, is the same answer, do you not have an opinion whether—
“Question: The next paragraph two, the factual basis for the second affirmative defense in validity were both the ′471 patent and ′825 patent, according to proof elements for each ground of invalidity pleaded. And can you tell us the factual basis on Microsoft's behalf for the ′471 patent?
4/13/06 Trial Tr. 13:4–13:23.
Microsoft contends that the only effect Cole's testimony could have was to create the type of improper negative inference against Microsoft that the Federal Circuit banned in Knorr–Bremse.
the Federal Circuit held that a party's failure to receive advice of counsel cannot provide an adverse inference or evidentiary presumption that if the party had obtained such advice it would have been unfavorable. Id.
at 1346. There is a difference between the adverse inference discussed in Knorr–Bremse
and any inference that might have arisen from the deposition testimony of Cole. Cole testified that she did not have an opinion related to either infringement or invalidity with regard to the patents-in-suit. The inference that the jury could have drawn from Cole's testimony was that Microsoft did not seek the advice of counsel based on the fact that Cole did not have an opinion on the subjects of infringement or invalidity. This type of inference is still appropriate under Federal Circuit authority. In Knorr–Bremse,
the Federal Circuit specifically stated that it was not addressing the question of whether, “the trier of fact, particularly a jury, can or should be told whether or not counsel was consulted (albeit without any inference as to the nature of the advice received) as part of the totality of the circumstances relevant to the question of willful infringement.” 383 F.3d at 1346–47. Neither the Court nor z4 instructed the jury to draw an adverse inference or evidentiary presumption that had Microsoft obtained the advice of counsel, the opinion would have been unfavorable. Accordingly, the portion of Cole's testimony read into evidence by z4 was not improper.
Contrary to Microsoft's argument, z4 introduced evidence, other than Cole's deposition, to support willful infringement of the patents-in-suit. It is undisputed that Microsoft had knowledge of the ′471 patent before this suit was filed. z4 introduced some evidence that Microsoft had knowledge of the ′ 471 patent as early as 2000 and introduced substantial evidence that Microsoft was aware of the patent by February 2003. z4 presented evidence that in 2003 it approached Microsoft in an attempt to license the ′471 patent, provided Microsoft with a copy of its patent portfolio, which included the ′ 471 patent, and provided Microsoft, at Microsoft's request, with a claim chart for the ′471 patent outlining literal infringement of the ′471 patent based on Microsoft's products. Microsoft presented no evidence that it investigated the scope of the ′471 patent to form a good faith belief that it did not infringe or that the patent was invalid in 2003 or even after this suit was filed. Accordingly, Microsoft did not prove that it made a reasonable determination that it was not infringing the ′471 patent after learning of it.
*9 Microsoft argues that it was acting in good faith because it invented and commercialized product activation in BP 98 before Colvin patented his invention. However, the jury did not accept the argument that Microsoft anticipated Colvin's ′471 patent and, therefore, this argument does not insulate Microsoft from a finding of willful infringement.
Microsoft claims that it did not have knowledge of the ′825 patent until z4 filed suit on September 22, 2004 and, therefore, argues that it did not have a duty of care regarding the ′825 until that date. It is undisputed that Microsoft did not have a duty of care with regard to the ′825 patent until it actually issued. However, z4 did introduce evidence that Microsoft was aware of the pending ′825 patent as early as 2003, and therefore, received advance warning that it might infringe the patent, when and if it issued. Although Microsoft may not have had a duty of care to insure it did not infringe the ′ 825 patent until after the patent actually issued, there is evidence that Microsoft knew of the ′825 patent before the suit was filed.
Microsoft claims it showed due care after the suit was filed because it promptly hired litigation counsel to defend against z4's claims and had substantial defenses of noninfringement, invalidity, and inequitable conduct. However, the Federal Circuit has held that “defenses prepared for trial are not equivalent to the competent legal opinions of non-infringement or invalidity which qualify as “due care” before undertaking any potentially infringing activity.” Crystal Semiconductor Corp. v. TriTech Microelectronics Int'l, Inc., 246 F.3d 1336, 1352 (Fed.Cir.2001).
Furthermore, as discussed below in more detail, Microsoft's behavior during the litigation of this case was far from exemplary and supports a finding of willfulness.
While Microsoft did present substantial defenses at trial that a reasonable jury could have found convincing, in this case, the jury did not. Based on the totality of the circumstances, a reasonable jury also could have concluded that Microsoft willfully infringed the ′471 and ′825 patents, as the jury did here.
Autodesk's Motion for Judgment as a Matter of Law Regarding Damages
Autodesk argues that no reasonable jury could have concluded that an award of $18 million dollars in damages against Autodesk was warranted. Autodesk also contends that the testimony of z4's damages expert Bratic was legally insufficient because it should have been excluded as contrary to the Court's pre-trial ruling on Defendants' motion in limine. Autodesk, like Microsoft, argues that the Court definitively ruled on the issue by granting Defendants' pre-trial motion in limine. For the same reasons discussed above with regard to Microsoft's motion for JMOL on damages, the Court rejects Autodesk's argument that Bratic's testimony should not have been considered by the jury.
Autodesk further argues that Bratic's testimony regarding Autodesk's damages is insufficient. Autodesk contends that Bratic made no attempt to quantify damages and, therefore, the jury could not have relied on any quantified damage evidence because it did not exist. However, z4 introduced Plaintiff's Exhibit 565, which showed the numbers used to calculate damages against Autodesk. Bratic testified about the documents he used to gather information about Autodesk's revenues based on accused products, he discussed the factors he considered in calculating the royalty rate, and he indicated how he calculated the damages. 4/13/06 Trial Tr. 29:8–30:22, 30:23–37:13, 45:19–46:2, 48:4–53:10, 54:7–55:21, 57:19–58:11, 71:10–73:7. Bratic did not go into as much detail when discussing the documents behind the numbers used to create Plaintiff's Exhibit 565 related to Autodesk as he did when discussing the damage calculations for Microsoft. However, Bratic identified the documents that he referred to and made it clear that he used the same method described with regard to his Microsoft damage calculation. Autodesk had the opportunity at trial to cross-examine Bratic on the basis of his calculation and the documents used to create Plaintiff's Exhibit 565.
Autodesk also argues that Bratic's reasonable royalty calculation was improperly based on a lost profits model. Like Microsoft, Autodesk's argument that Bratic based his damage calculation on a lost profits model is unpersuasive. As discussed above, Bratic testified that he based his calculations on a hypothetical negotiation.
Autodesk contends that there is no basis for the 1.5% royalty rate used by Bratic to calculate the damages against Autodesk. “A jury's choice [of a reasonable royalty] simply must be within the range encompassed by the record as a whole.” Unisplay, 69 F.3d at 519. Although the explanation was brief, Bratic did explain how he got to the 1.5% royalty rate. Furthermore, Colvin explained the royalty rates he had accepted when licensing previous patents. 4/11/06 Trial Tr. 95:3–12; 4/13/06 Trial Tr. 54:7–55:5, 73:4–6.
Finally, Autodesk argues that Bratic's testimony and report did not consider the availability of a noninfringing alternative. However, Defendants directly confronted Bratic about this issue on cross-examination and he explained that he considered the noninfringing alternatives and concluded that they were not as effective at stopping piracy as the patents-in-suit. See
4/13/06 Trial Tr. 87:1–88:9.
*12 Although z4 provided less evidence related to the damage calculation against Autodesk, than it did against Microsoft, it did present a sufficient factual basis for the damage calculation and that calculation was supported by relevant evidence. See
4/13/06 Trial Tr. 30:23–73:7; Pl.'s Ex. 565. Accordingly, Autodesk's motion for JMOL on damages is DENIED.
MICROSOFT AND AUTODESK'S MOTION FOR NEW TRIAL
Under Rule 59(a) of the Federal Rules of Civil Procedure, a new trial can be granted to any party to a jury trial on any or all issues “for any reason for which new trials have heretofore been granted in actions at law in courts of the United States.” “A new trial may be granted, for example, if the district court finds the verdict is against the weight of the evidence, the damages awarded are excessive, the trial was unfair, or prejudicial error was committed in its course.” Smith v. Transworld Drilling Co., 773 F.2d 610, 612–13 (5th Cir.1985).
Defendants move for a new trial on multiple grounds. Defendants argue that they are entitled to a new trial because prejudicial error was committed when the court refused to allow testimony on what prior art was and was not before the patent examiner and then refused to instruct the jury on this point. Defendants claim that a fundamental tenet of patent law is that “while the presentation at trial of a reference that was not before the examiner does not change the presumption of validity, the alleged infringer's burden may be more easily carried because of this additional reference.” SIBIA Neurosciences, Inc. v. Cadus Pharm. Corp., 225 F.3d 1349, 1355–56 (Fed.Cir.2000). Defendants also argue that the Court erred by not allowing an instruction stating, “[t]hat the burden is more easily carried when the references on which the assertion is based were not directly considered by the examiner during prosecution.” 4/18/06 Trial Tr. 134:1–135:2.
Defendants produce no authority that the failure to give the requested instruction is error. In fact, Defendants' instruction would be improper because it might lead the jury to believe that the burden of proof is less than clear and convincing when prior art was not considered by the PTO. This is in direct contradiction to Federal Circuit law. See
Uniroyal, Inc. v. RudkinWiley Corp., 837 F.2d 1044, 1050 (Fed.Cir.1988)(holding that the burden of proof is not reduced when prior art presented to the court was not considered by the PTO).
In support of their argument, Defendants also cite a paragraph from the section entitled “Parts of a Patent” from the Federal Circuit Bar Association's Model Jury Instructions, which indicates that the cover page of a patent lists the prior art publications considered by the PTO. This is not the instruction Defendants requested at trial and it is not even related to a model instruction on the validity of a patent. Section 9.2 of the Fifth Judicial Circuit Pattern Jury Instructions (2004) sets out a pattern jury instruction related to patent validity. This instruction is based on Federal Circuit law and makes no mention of Defendants' requested instruction. The Court did not commit error by not allowing Defendants' requested instruction.
*13 Defendants also contend that the jury was prohibited from learning that the prior art presented in this case was not before the examiner. Defendants complain that an objection sustained by the Court prevented them from explaining to the jury what prior art was and was not considered by the patent examiner in prosecuting the patents-in-suit. The Court did not prevent Defendants from presenting evidence of what prior art references were on the face of the patent and, therefore, considered by the PTO in prosecuting the patents-in-suit. The Court sustained z4's objection that Defendants' expert could not testify to “art that was before the patent examiner” because the expert “doesn't know what the examiner may have found.” See
4/18/06 Trial Tr.at 42:17–25). This objection was property sustained. Defendants' expert could not testify to what was before the patent examiner because he did not have personal knowledge of such facts. Defendants could have rephrased the question to elicit the testimony they claim they were prevented from presenting at trial. Furthermore, Defendants' expert or some other witness could have testified to what was listed on the patent as prior art and what a certain reference being listed on a patent in that capacity means. The record indicates that Defendants did not make such an attempt. Defendants should not be granted a new trial based on the Court's instructions or the Court's sustained objection to the question asked of Defendants' expert.
Defendants further move for a new trial arguing that several jury instructions regarding corroboration of testimony related to prior art references were improper and prejudicial. The first instruction that Defendants contend was improper states: “Oral testimony from interested witnesses is not sufficient to corroborate reduction to practice. Corroboration must be done using documents.” Defendants contend that this instruction prevented the jury from considering the testimony of Aidan Hughes (“Hughes”) and other witnesses' testimony on the issue of anticipation.
The Federal Circuit has indicated that there is “a clear requirement” that oral testimony by interested parties related to invalidity must be corroborated by documentary testimony. Lacks Indus., Inc. v. McKechnie Vehicle Components USA, Inc., 322 F.3d 1335, 1350 (Fed.Cir.2003). “[T]he need for corroboration exists regardless of whether the party testifying concerning the invalidating activity is interested in the outcome of the litigation or is uninterested but testifying on behalf of an interested party. That corroboration is required in the former circumstance cannot be debated.” Finnigan Corp. v. Int'l Trade Comm'n, 180 F.3d 1354, 1367 (Fed.Cir.1999).
Hughes is undeniably an interested party to this litigation. He is a current employee of Microsoft, a party to the litigation. Based on Federal Circuit authority and the factual circumstances in this case, the instruction that “Oral testimony from interested witnesses is not sufficient to corroborate reduction to practice,” was not improper under the circumstances.
*14 Furthermore, Defendants did not produce any oral testimony other than that of Hughes related to invalidity based on BP 98. Accordingly, the only evidence that could corroborate the testimony of Hughes, an interested witness, was the documentary evidence that Defendants presented on the issue. Therefore, the instruction by the Court that “corroboration must be done using documents” was proper under the circumstances, was not prejudicial to Defendants, and does not warrant a new trial.
Defendants also argue that the instruction “An inventor's testimony of conception must be corroborated in a single document” was improper and presents sufficient error to warrant a new trial. The Court agrees that the instruction was improper, however, the instruction does not present harmful error under the circumstances.
The Court's entire instruction in section 6.4.1 titled “Anticipation by Prior Invention–Conception” states:
Conception is the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention, as it is thereafter to be applied and practiced. A conception must encompass all limitations of the claimed invention and is complete only when the idea is so clearly defined in the inventor's mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation.
An inventor's testimony of conception must be corroborated in a single document. A document used to corroborate conception need not, itself, be corroborated.
This instruction addresses conception in the context of an anticipation defense. Anticipation by a prior invention under § 102(g)(2) requires that the prior invention was conceived and reduced to practice before the filing date of the patent in question. Sandt Tech., Ltd. v. Resco Metal & Plastics Corp., 264 F.3d 1344, 1350 (Fed.Cir.2001). Conception is:
“the formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.” Conception is complete only when the idea is so clearly defined in the inventor's mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation. Because it is a mental act, courts require corroborating evidence of a contemporaneous disclosure that would enable one skilled in the art to make the invention.
Thus the test for conception is whether the inventor had an idea that was definite and permanent enough that one skilled in the art could understand the invention; the inventor must prove his conception by corroborating evidence, preferably by showing a contemporaneous disclosure. An idea is definite and permanent when the inventor has a specific settled idea, a particular solution to the problem at hand, not just a general goal or research plan he hopes to pursue.
Burroughs Wellcome Co., v. Barr Labs., Inc., 40 F.3d 1223, 1228 (Fed.Cir.1994) (citations omitted); see also
Singh v. Brake, 222 F.3d 1362, 1367 (Fed.Cir.2000). Corroboration of conception can be done by documentary, physical, or circumstantial evidence. See Sandt Tech., 264 F.3d at 1351. “Additionally oral testimony of someone other than the alleged inventor may corroborate an inventor's testimony.” Id.
Accordingly, under Federal Circuit authority, the instruction that “An inventor's testimony of conception must be corroborated in a single document” is improper. When an inventor testifies about the conception of his invention, that oral testimony can be corroborated with documents, physical evidence, circumstantial evidence, or oral testimony.
*15 Although the instruction was improper, it does not constitute harmful error under the circumstances. Defendants admittedly did not name an inventor of BP 98. In their Motion for JMOL of Invalidity, Defendants stated, “For its § 102(g) defense, Microsoft did not need to name a particular person, whether David Pearce, Philippe Goetschel, or Aidan Hughes. It was sufficient, under Dow that Microsoft corporately both conceived and reduced to practice before Mr. Colvin.” Again in their Motion for New Trial Defendants stated, “Moreover, focusing on an argument that is incorrect as a matter of law, z4 argued that the Defendants had failed to identify who the inventor of Brazilian Publisher was and therefore it was not prior art.” Defendants again cite Dow in support of their argument.
During closing arguments, Defendants argued: “And they say they're not an inventor at Microsoft of what ended up in here. And with all due respect, how did it get created then? You can't have a physical thing like this that Mr. Hughes followed the architecture right here in these documents which he explained to you preceded Mr. Colvin if they didn't do it.” Id.
268:8–14. Based on the testimony presented at trial, Defendants' closing arguments, and post-trial briefing, it is only reasonable to conclude that Defendants' position at trial was that Microsoft, as a company, conceived the anti-piracy portion of BP 98 that Hughes then reduced to practice, as outlined in the specifications entered as exhibits by Defendants.
In accordance with Microsoft's position regarding the inventor of BP 98, Defendants never presented oral testimony of an individual inventor who allegedly conceived the anti-piracy portion of BP 98.
Although the instruction that “An inventor's testimony of conception must be corroborated in a single document” is incorrect, it was not at issue in the case because there was no oral testimony by an inventor regarding the conception of BP 98. Therefore, whether such testimony must be corroborated by a “single document” was not an issue in the case. The jury had to ignore the instruction because it could not be applied under the facts presented at trial by Defendants. Based on these facts and without deciding whether or not Defendants can legally argue that Microsoft, as a company, conceived an invention,
the improper instruction could not create sufficient error to warrant a new trial on the issue of anticipation.
Defendants move for a new trial based on a vague argument that the Court's instructions were insufficient to allow the jury to determine particular pieces of prior art. Defendants do not identify what instructions they are complaining about. Defendants' vague and unclear argument on these grounds do not warrant the granting of a new trial.
Defendants further argue that the Court committed prejudicial error by removing Defendants' requested instruction related to the defense of derivation based on R13. Defendants argue that they did not need to object at the charge conference because they submitted a request for the derivation instruction in their joint proposed jury instructions and z4 objected to the instruction in the joint proposed instructions. However, the joint proposed jury instruction referred to by Defendants was not the Courts' proposed charge that Defendants are required to object to at the charge conference. The document Defendants claim z4 objected to was the parties' charge not the Court's. The Court presented its proposed jury charge to the parties, and Defendants did not object to the absence of the derivation instruction. Accordingly, Defendants waived any objection to the absence of the instruction. See
*16 Defendants argue that the Court's jury instruction related to willfulness gave undue weight to instructions regarding the opinion of counsel and invited the jury to draw an improper adverse inference. The Court's instruction undisputedly set out the correct standard for willful infringement and then stated that “the absence of a lawyer's opinion does not require you to find willfulness.” The Court is not persuaded that Defendants suffered any prejudice as a result of the Court's instruction regarding willfulness.
Defendants contend that it was prejudicial error for the Court to instruct the jury that “[i]n deciding whether to combine what is described in various items of prior art, you should keep in mind that there must be some motivation or suggestion for a skilled person to make the combination covered by the patent claims.” This instruction was proper under Federal Circuit precedent. See Al–
Site Corp. v. VSI Int'l, Inc., 174 F.3d 1308, 1323–1324 (Fed.Cir.1999)(“The party seeking patent invalidity based on obviousness must also show some motivation or suggestion to combine prior art teachings.”).
Defendants move for a new trial arguing that the Court's construction of the terms “automatically contacting” in the ′471 patent and “user” in the ′471 and ′825 patents were improper. With regard to “automatically contacting,” Defendants re-urge the arguments they presented to the Court at the Markman
hearing and in their Markman
briefing. The Court's ruling on the term “automatically contacting” stands and Defendants are not entitled to a new trial on these grounds.
As to the term “user,” Defendants argue that they relied on the Court's ruling at the March 26, 2006 pre-trial conference to mean that their expert could testify to his interpretation of the term “user.” The Court stated during the pre-trial conference that “I'm just going to have to deal with this when I get into it” and “I'll take objections at the time it comes in” and did not make any statements that Defendants could have reasonably relied on to believe that their expert's interpretation of the term “user” would be allowed if objected to. The term “user” became disputed during the course of the trial. “The court has the power and obligation to construe as a matter of law the meaning of language used in the patent claim.” Markman v. Westview Instruments, Inc., 52 F.3d 967, 979 (Fed.Cir.1995). As discussed above, the Court construed the term “user” after hearing argument from the parties and stands by its ruling. Accordingly, Defendants are not entitled to a new trial based on these grounds.
Defendants move for a new trial based on comments made by z4 before the jury with regard to Defendants' witness Cole who was not present at trial. During the pre-trial conference, the Court granted Defendants' Motion in Limine with regard to z4's ability to comment on the absence of Cole. In granting the motion the Court stated, “I will grant your Motion in Limine. But if you wish to go into it, feel free to approach the bench and I'll be glad to let you walk down that path if you want.” In granting Defendants' Motion in Limine pre-trial, the Court did not make a definitive ruling on the issue of whether testimony related to Cole's absence was admissible but rather employed a prophylactic measure that required z4 to approach the bench before going into testimony on the subject.
*17 At trial, Defendants' expert Brian Napper mentioned Cole's deposition testimony to support his argument, to which z4 responded that she was not present at trial to support her testimony. Whether z4 should have approached the bench prior to going into her absence at trial is questionable. However, under Rule 103 of the Federal Rules of Evidence, Defendants were required to timely object to the mention of Cole's absence if they felt it was in violation of their pre-trial motion in limine. Defendants did not object to z4's mention of Cole's absence and, therefore, Defendants did not properly preserve any error that may have occurred.
Defendants move for a new trial on the grounds that the Court improperly excluded Philippe Goetschel's (“Goetschel”) June 1995 Memo from evidence. During trial, z4 read one of Microsoft's responses to an interrogatory into evidence. 4/13/06 Trial Tr. 119:9–120:20. That response referenced Goetschel's June 1995 Memo, however, z4's reading of the interrogatory response into evidence did not also automatically enter the Goetschel Memo into evidence. Any argument that it did is absurd.
Defendants further argue that z4 agreed to allow the Goetschel Memo into evidence when four days later Defendants attempted to enter multiple documents into evidence by referring to the documents' bates numbers and stating that they were mentioned in an interrogatory response read into the record by z4. z4's counsel stated in objection to Defendants' attempt to enter these documents, “on the representation that they are the documents from the interrogatories, we have no objection. We'll check that. And if there's a problem, we'll raise it later.” Later that same day when Microsoft attempted to question Hughes on the Goetschel Memo, z4 objected on the grounds that Hughes was not the custodian and had no personal knowledge as to certain aspects of the memo. The Court clarified at the time of z4's specific objection to the Goetschel Memo that z4 had reserved the right to object to these documents, “I think he reserved the right to object to those after he had a chance to review them.” 4/17/06 Trial Tr. 36:11–37:10.
Under the circumstances, z4 maintained the right to object to the Goetschel Memo and timely raised that objection when Microsoft attempted to use the memo at trial.
Defendants further complain that the Court improperly excluded the Goetschel Memo on the basis of hearsay. Defendants contend that Hughes could provide the proper predicate to establish the memo as a business record. The Court did not allow Hughes to testify to the requirements of Rule 803(6) of the Federal Rules of Evidence to prove that the document was a business record because the actual author of the memo, Goetschel, was sworn as a witness in the case and could have testified himself as to the authenticity of the document. Furthermore, the Court did not find that Hughes was a qualified witness to testify to all of Rule 803(6)'s requirements as to the Goetschel Memo and properly excluded the document under the circumstances.
*18 Defendants move for a new trial arguing that the Court's exclusion of testimony from Hughes regarding a database of detailed customer registration information for BP 98 from 1998–99 and a summary chart created by Hughes from the data in the database was improper. The circumstances surrounding the exclusion of this evidence is discussed in more detail below. However, the Court properly excluded Hughes's testimony on the database and summary chart. Accordingly, a new trial is not warranted on these grounds.
Defendants move for a new trial on the grounds that they were prejudiced when the Court allowed z4 to read excerpts from the deposition of Microsoft's Rule 30(b)(6) representative, Cole, into evidence. The excerpts read into evidence from Cole's deposition related to her knowledge of Microsoft's defenses on noninfringement and invalidity. Neither Cole nor any other corporate representative from Microsoft was present at trial on behalf of Microsoft.
Defendants objected based on Rules 402 and 403 of the Federal Rules of Evidence arguing that, because Cole was not an attorney, z4 could not ask questions about legal conclusions. The Court allowed the testimony because Cole explained in her deposition why she could not answer the questions and because there was nothing legally inadmissible about the questions and answers considering that she was Microsoft's corporate representative. See
4/13/06 Trial Tr. 5:4–8:7. The Court's ruling was proper under the circumstances and does not establish grounds for a new trial.
Defendants move for a new trial on the grounds that z4 improperly commented on the number of exhibits Defendants brought to trial. Defendants included over 3,000 exhibits, totaling 30 linear feet of documents, on their pre-trial exhibit list. As discussed below in more detail, Defendants' attempt to flood z4 in exhibits constituted litigation misconduct. Any mention by z4 about Defendants' excessive exhibits does not establish grounds for a new trial.
Defendants move for a new trial arguing that z4 made improper arguments regarding Microsoft's revenues, size, and alleged actions toward z4 during z4's closing argument. Defendants also contend that z4 improperly commented on the absence of Microsoft witnesses in violation of this Court's order. Regardless of whether these comments present sufficient prejudice, if any, to justify a new trial, Defendants did not object at trial to any of the comments they now complain of. Accordingly, under Rule 103 of the Federal Rules of Evidence, Defendants waived their right to complain on these grounds and a new trial is not warranted.
Defendants move for a new trial on the grounds that the jury was improperly instructed that it could make an adverse inference against Microsoft with regard to Plaintiff's Exhibit 558, which was an email sent from Luiz Moncau (“Moncau”), a Microsoft employee, to David Pearce (“Pearce”), Cole and several other Microsoft employees (“the Moncau email”).
As discussed in more detail below, the Moncau email was not produced to z4 until the day before trial when z4 took the deposition of Moncau and he produced the email. Although z4 had requested all relevant documents of Moncau, Cole, and Pearce, during discovery, which should have included this email, the email was not produced until Moncau's deposition the day before trial. The Court properly instructed the jury with regard to the Moncau email as a sanction against Microsoft for not producing the email, which should have been produced much earlier. Accordingly, the instruction does not establish grounds for a new trial.
*19 Finally, Defendants move for a new trial on the grounds that the great weight of the evidence is against the verdict on the issues of infringement and invalidity of the patents-in-suit. Defendants base their argument on the same grounds they presented in support of their motions for JMOL on infringement and invalidity. For the same reasons discussed in regard to Defendants' motions for JMOL, Defendants have not established that a motion for new trial is warranted on these grounds.
For the reasons discussed above, Defendants' Motion for New Trial is DENIED.
Colvin purchased a copy of Autodesk's R13 software in August of 1995 and registered his copy of the software with Autodesk on September 1, 1995. R13 came on two separate disks, a CD–ROM disk and a floppy disk referred to as the “Personalization Disk.” To install R13, a user would insert the CR–ROM into the user's CD drive. The CD would then begin the software installation process. During the installation process the user would be prompted to insert the floppy disk into the floppy disk drive. Once the floppy disk was inserted, the user was asked to enter various personal information. The user was not prompted to enter the serial number of the product or any other authorization code at this point. After the user's personal information was entered, the installation process continued. Once the installation process was completed, the user configured the software by answering different questions related to the user's computer and other hardware.
After the configuration of the software was completed, the program asked the user if he wanted “to enter authorization at this time?” The user could answer either “Y” for yes or “N” for no to this question. If the user chose “Y,” he was prompted to enter an authorization code given to him by the dealer who sold him the software. If the user chose “N,” he did not have to enter the authorization code at that time and was informed of a thirty day grace period before he would have to enter an authorization code to allow the use of the software. Users could also get an authorization code from Autodesk by contacting Autodesk via telephone, fax, or postal mail.
When Colvin installed his version of R13 he was asked to enter personal information but was never prompted to enter a serial number. When asked if he wanted to authorize his software he chose “Y” and entered the authorization code given to him by the dealer who sold him the program. Colvin was never informed of a 30 day grace period because he chose “Y” instead of “N.” Colvin never owned a copy of Autodesk's R14 software.
*20 The prosecuting attorney for the ′471 patent was David Bir (“Bir”). Colvin did not provide Bir with any information about R13 or R14 during the prosecution of the ′471 patent. The prosecuting attorney for the ′825 patent was James Kallis (“Kallis”). As with the ′471 patent, Colvin did not provide Kallis with any information regarding R13 or R14 during the prosecution of the ′825 patent.
U.S. Patent No. 5,341,429 (“the ′429 patent”) is listed under “References Cited” on the ′471 patent, indicating that it was considered by the PTO during the prosecution of the ′471 patent. The ′429 patent discloses an anti-piracy process that is very similar to the process utilized by R13. One embodiment of the ′429 patent allows the software to be used during a grace period for a certain number of times before it is enabled. An ID number is embedded in the software to allow the software to run during the grace period. Once the grace period is over, a password is manually provided to the user. The user then communicates the password to the program to activate the software.
*21 Defendants contend that the ′471 and ′825 patents are unenforceable based on the inequitable conduct of Colvin. Defendants argue that Colvin intentionally withheld a material reference, R13, from the Patent and Trademark Office (“the PTO”) during the prosecution of both patents. Defendants argue that R13 is material because it is inconsistent with a position taken by Bir when he remarked in the ′471 file history that:
Applicant has amended a number of claims to further distinguish over the prior art relied upon by the examiner. The prior art relied upon taken alone or in any permissible combination does not disclose a number of features found in various claims as filed, and other claims as amended, including requiring a first password or authorization code to activate software and requiring additional passwords or authorization codes after expiration of an interval associated with the password.
4/12/06 Trial Tr. 70:8–17. Defendants contend that R13, like the ′471 patent, required two passwords, making Bir's statement inconsistent and, therefore, making R13 material.
R13 does not require two passwords. R13 only requires one password in the form of an authorization code that is communicated to the software to permanently enable the software. Defendants contend that the serial number embedded in the floppy disk of R13 is a password. However, Defendants did not prove by clear and convincing evidence that the serial number embedded in the floppy disk had anything to do with activating the software. Furthermore, the fact that the serial number is embedded in the software does not make it a password in the sense that the concept password is used in the ′471 patent.
Defendants argue that the ′471 patent specifically allows for a password to be a serial number. This is true; the ′471 patent indicates that a serial number can act as a password. However, there is nothing in the ′471 patent that indicates that a serial number embedded in the software as it is in R13 and the ′429 patent is a password. If a serial number is used as a password in the invention disclosed in the ′471 patent, the serial number must be communicated to the software and cannot be a part of the software. Bir's statement that the ′471 is distinguishable from the prior art based on its multiple passwords is not inconsistent with R13. Accordingly, R13 is not material on this basis.
Furthermore, R13 is cumulative of the ′429 patent, which was considered by the examiner during the prosecution of the ′471 patent. The ′429 patent and R13 disclose very similar processes for anti-piracy protection. One embodiment of the ′429 patent has a serial number or code embedded in the software and has a grace period that begins without the user having to communicate a password to the software. Like R13, after the grace period ends, the user must manually obtain a password to activate the software. R13 is not material to the ′471 patent because it is cumulative of the ′429 patent, which was considered by the PTO in prosecuting the ′471 patent.
Under 35 U.S.C. § 285 of the Patent Act, “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” A case may be exceptional based solely on litigation misconduct and unprofessional behavior. Rambus, Inc. v.. Infineon Techs. AG, 318 F.3d 1081, 1106 (Fed.Cir.2003); Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed.Cir.2002). A case may be deemed exceptional on a party's or its counsel's display of bad-faith during either the pre-trial or trial stages. Kloster Speedsteel AB v. Crucible, Inc., 793 F.2d 1565, 1580 (Fed.Cir.1986)(overruled on other grounds). The prevailing party seeking an attorneys' fee award has the burden of establishing that the case is exceptional by clear and convincing evidence. Reactive Metals & Alloys Corp. v. ESM, Inc., 769 F.2d 1578, 1582 (Fed.Cir.1985)(overruled on other grounds). A finding of willful infringement is a factor to be considered in determining if a case is exceptional. See
Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1329 (Fed.Cir.1987).
In its motion, z4 presents many instances where Defendants acted in bad faith and committed litigation misconduct sufficient to make this an exceptional case. The Court discusses the more flagrant here. First, the Moncau email.
At the last pre-trial conference, the Court deviated from its usual rules to allow Defendants to bring a belatedly identified trial witness, Moncau, with the condition that z4 could depose Moncau before trial started. As discussed above, z4 was finally able to depose Moncau on Sunday, April 9, 2006, the very day before trial began. During the course of Moncau's deposition he revealed an email that was later introduced into evidence as Plaintiff's Exhibit 558 (“the Moncau email”). The Moncau email was an email sent from Moncau to various Microsoft employees including Cole and Pearce and addressed in part whether Microsoft's BP 98 software worked for its intended purpose of stopping piracy. This was an important piece of evidence for z4 and was unfavorable to Microsoft, yet it had never been produced by Microsoft. Moncau testified in his deposition that he provided all of his documents to Microsoft's counsel over a year before the deposition. Nevertheless, the email had never been produced by Microsoft during discovery despite the fact that it was between three Microsoft employees referenced in the email, all of whom allegedly gave all of their relevant documents to Microsoft's counsel for production. Making matters even worse, Defendants admit they were aware of the Moncau email several hours before Moncau's deposition, but still withheld it from z4 until z4 found out about it during questioning during the deposition. This raises a serious question as to whether the email would have ever seen the light of day, had z4 not uncovered it during Moncau's deposition the day before trial. As a sanction for not disclosing the email, the Court instructed the jury that Microsoft failed to produce this document during discovery as it was supposed to have done.
*23 Second, is the Hughes database. As discussed above, Microsoft attempted to use a summary chart at trial created by Hughes to demonstrate that BP 98 worked for its intended purpose. The summary chart had never been produced to z4 and was allegedly only created by Hughes during the first day of trial, April 10, 2006. The summary chart was allegedly compiled from data found in a Hughes database that tracked the customer registrations of BP 98. However, the identity and location of this database was never identified to z4 until it appeared as an attachment to a motion for summary judgment long after discovery had closed. z4 had inquired about this database some eight months earlier during Hughes's deposition in August, 2005. Hughes testified that the alleged database did not exist. However, a week later, Microsoft produced a CD labeled “source code” with 11,274 files on it that belonged to Hughes. At trial Microsoft argued that the database was on the CD in a subfolder and z4 could have found it. Yet Microsoft admits that it knew all along the database was on the CD and never informed z4 or corrected Hughes's testimony on the topic.
The database became a larger issue when Microsoft attempted to have Hughes testify at trial about data he extracted from the database using his own extraction method. In an attempt to bolster Defendants' claim that BP 98 worked for its intended purpose, Hughes intended to testify, based on this data and his own extraction method, that no copy of BP 98 was installed on more than three computers over the internet. After reviewing the database, z4 discovered at least one instance where the same copy of BP 98 appeared to have been installed on 828 different computers over the internet. Microsoft's attempt at explaining away this data entry was unpersuasive.
Closer inspection of the database by z4 revealed not only that Hughes's data summary was an inaccurate reflection of the data, but that Microsoft had not accurately disclosed the method of extraction used by Hughes to create his summary chart. The Court determined that Microsoft had attempted to mislead z4, the Court, and the jury and excluded Hughes from testifying with regard to the database and his summary chart.
Third, is the “Read This First” card. Before trial, Defendants filed a motion for summary judgment on inequitable conduct. Attached to that motion was the declaration of Michelle Winkenbach (“Winkenbach”), which, among other things, was intended to prove that Colvin had received a copy of a blue “Read This First” card when he purchased his personal copy of Autodesk's R–13 software in 1995. Winkenbach's declaration asserted that the SKU number on Colvin's copy of R–13 matched a SKU in Autodesk's bill of materials database, unproduced to z4 at that time, implying that Colvin had received a “Read This First” card with his copy of R–13.
After production of the bill of materials database, z4 discovered that the SKU relied on by Winkenbach was not the same as the one on Colvin's disk and that the information in the database related to the SKU on Colvin's software did not show that a “Read This First” card was included with his software. Defendants claim that the discrepancy in Winkenbach's declaration was merely a mistake. The facts surrounding the Winkenbach declaration are highly questionable. If the information in the Winkenbach declaration was merely a mistake, it could have turned into a very beneficial mistake for Defendants if z4 had not caught the discrepancy in the SKU numbers. In light of the other instances of litigation misconduct by Defendants brought to the Court's attention, Defendants are no longer given the benefit of the doubt before this Court. Accordingly, the Court considers this “mistake” an intentional attempt by Defendants to mislead z4 and this Court.
*24 Fourth, is Defendants' voluminous exhibit tactic. Defendants marked an unprecedented 3,449 exhibits for trial, which resulted in a 283 page exhibit list and took up, as z4 points out, “30 lineal feet.” Yet, at trial Defendants only admitted 107 of these exhibits. Defendants argue that the unreasonable number of remaining exhibits were intended to combat z4's previous position that Colvin conceived the invention disclosed in the ′471 patent in March of 1996 instead of September 1997. This excuse is neither reasonable nor believable. The Court concludes that Defendants attempted to bury the relevant 107 exhibits admitted at trial in its voluminous 3,449 marked exhibits in the hope that they could conceal their trial evidence in a massive pile of decoys. This type of trial tactic is not only unfair to z4, but creates unnecessary work on the Court staff and is confusing and potentially misleading to the jury.
Finally, the Court is greatly disturbed by the repeated instances where Defendants actions go beyond what can be dismissed as a mere appearance of impropriety and collectively appear to represent a pattern which is of disappointment to the Court and a disservice to legitimate advocacy. The repeated examples, some of which are not even mentioned here, of what can be described as nothing less than misleading on the part of Defendants, justify a conclusion that Defendants committed litigation misconduct. This conduct, coupled with the fact that Microsoft was found to have willfully infringed the patents-in-suit results in this case being deemed exceptional. Accordingly, the Court awards z4 reasonable attorneys' fees and expenses, excluding expenses related to expert witnesses.
When determining a reasonable attorneys' fee award, a court should consider all relevant circumstances in a case. Junker v. Eddings, 396 F.3d 1359, 1365 (Fed.Cir.2005). In determining such an award, a court usually analyzes “hourly time records, full expense statements, documentation of attorney hourly billing rates in the community for the particular type of work involved, the attorney's particular skills and experience, and detailed billing records or client's actual bills showing tasks performed in connection with the litigation.” Id. at 1366.
z4 presented the Court with detailed billing records, a detailed explanation of the skill level and experience of each attorney and paralegal billed, and detailed records of its expenses incurred. See
Supplement to z4 Technologies Inc.'s Motion for an Order Finding Litigation Misconduct, Enhancing Damages, and Awarding Attorney Fees and Expenses (Docket No. 392). Based on the information provided by z4, the total combined fees and expenses incurred by z4 for this case amount to $2,702,929. Defendants point to a collection of billing entries that appear to be improper based on the description accompanying the entry. These entries amount to a total of $20,738, bringing the total fees and expenses for z4 to $2,682,191.
*25 z4 provided the Court with an excerpt from the 2005 American Intellectual Property Law Association's Economic Survey, which indicates that the average cost of litigating a patent case in Texas is $4,993,750. Id.
z4's fees and expenses associated with this case are reasonable considering the complexity of the case and the results z4's attorneys achieved at trial. Based on all of the relevant circumstances in the case, the Court awards $2,300,000 in attorneys' fees and expenses to be paid to z4, $1,978,000 by Microsoft and $322,000 by Autodesk.
A court may in its discretion enhance damages up to three times when there is a finding of willful infringement or bad-faith on the part of an infringing party. 35 U.S.C. § 284; see
SRI Int'l, Inc. v. Advanced Techs. Labs., Inc., 127 F.3d 1462, 1468–69 (Fed.Cir.1997). “Bad faith” in this context refers to an infringer's lack of due care with regard to avoiding infringement and is more properly called “bad faith infringement.” Jurgens v.. CBK, Ltd., 80 F.3d 1566, 1571 (Fed.Cir.1996). Although “bad faith” acts such as litigation misconduct are not sufficient alone to support an enhancement of damages, assuming the requisite culpability is present, such acts can be considered in determining whether to award enhanced damages and how much to award. See
id. at 1570–71. A finding of willful infringement provides sufficient culpability to justify the enhancement of damages under § 284. See id.
at 1571, 1573.
Enhanced damages are a punitive measure taken by the Court to penalize a willful infringer for his or her increased culpability. See id.
at 1570. However, a court can refrain from awarding enhanced damages in light of a finding of willfulness based on the weight of the evidence supporting willfulness and the closeness of the issues at trial. See
Brooktree Corp. v. Advanced Micro–Devices, Inc., 977 F.2d 1555, 1582 (Fed.Cir.1992); Laitram Corp. v. NEC Corp., 115 F.3d 947, 955 (Fed.Cir.1997). “The paramount determination in deciding enhancement and the amount thereof is the egregiousness of the defendant's conduct based on all the facts and circumstances.” Read Corp., 970 F.2d at 826. Factors courts consider in deciding whether to enhance damages and the amount of enhancement include:
(1) whether the infringer deliberately copied the ideas or design of another;
(2) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed;
(3) the infringer's behavior as a party to the litigation;
(4) defendant's size and financial condition;
(5) closeness of the case;
(6) duration of defendant's misconduct;
(7) remedial action by the defendant;
(8) defendant's motivation for harm;
(9) whether defendant attempted to conceal its misconduct.
The jury found that Microsoft wilfully infringed both the ′471 and the ′825 patents. While it is undisputed that Microsoft did not copy z4's inventions under factor one and that the questions of willfulness, invalidity, and infringement were such that a reasonable jury arguably could have found either way on these issues under factor five, these are the only two factors that weigh against enhancement of damages. All of the other factors support the enhancement of damages.
*26 As discussed above, Microsoft did not present any evidence that displayed an attempt to form a good faith belief that it did not infringe the patents-in-suit or that the patents were invalid, prior to the suit being filed. Even after the suit was filed, Microsoft only points to the fact that it promptly contacted litigation counsel and the defenses put forth by its litigation counsel as evidence of its due care. However, as stated above, defenses of litigation counsel are not strong evidence of due care.
As discussed above, Microsoft's behavior as a party to this case constitutes litigation misconduct making this an exceptional case. Microsoft is unquestionably large enough and profitable enough to pay enhanced damages.
Microsoft infringed the ′471 patent with knowledge of that patent since at least February 2003. This time period is significant considering the amount of infringing products that Microsoft sold in that amount of time. Although there is some evidence that Microsoft could have designed around the patents-in-suit, the Court is not aware of any remedial actions taken by Microsoft in an attempt to design around the patents or to remedy the potential infringement of Colvin's patents.
While the Court is not aware of any direct motivation on the part of Microsoft to harm Colvin, there is ample circumstantial evidence that to Microsoft Colvin and his patent rights were insignificant because Microsoft never thought Colvin would be able to pursue his rights against it. The evidence presented at trial suggests that Microsoft considered z4 a small and irrelevant company that was not worthy of Microsoft's time and attention, even if Microsoft was potentially infringing its patents. Microsoft might well have taken z4 seriously had z4 been a large and more established company.
Finally, Microsoft attempted to conceal its misconduct as evidenced by the incidents discussed above with regard to litigation misconduct. Considering the totality of the circumstances, particularly the lack of evidence that Microsoft presented with regard to due care in avoiding infringement of the ′471 patent prior to this suit being filed and Microsoft's misconduct during the course of the trial, enhancement of the damages awarded against Microsoft is appropriate. While the Court could enhance damages against Microsoft up to three times the jury verdict of $115,000,000, or $345,000,000, under the totality of the circumstances, enhancing damages to the maximum extent allowed under § 284 is not warranted. Accordingly, the Court awards an additional $25,000,000 making a total of $140,000,000 plus attorneys fees to be paid by Microsoft to z4.
For the reasons discussed above:
The Court DENIES Autodesk's Motion for Judgment as a Matter of Law of Noninfringement; Microsoft's Motion for Judgment as a Matter of Law of Noninfringement; Defendants' Motion for Judgment as a Matter of Law of Invalidity; Microsoft's Motion for Judgment as a Matter of Law Regarding Damages, Non–Retail Products, and Willfulness; Autodesk's Motion for Judgment as a Matter of Law Regarding Damages; and Microsoft's and Autodesk's Motion for a New Trial;
The Court HOLDS that the ′471 and ′825 patents are not unenforceable due to inequitable conduct.
The Court GRANTS z4's Motion and Brief in Support for an Order Finding Litigation Misconduct, Enhancing Damages, and Awarding Attorney Fees and Expenses; and z4'sMotion and Brief in Support for Prejudgment Interest. Accordingly, the Court ORDERS Microsoft to pay $1,978,000 in attorneys' fees and expenses to z4, as well as $25,000,000 in enhanced damages and $115,000,000 in actual damages, and ORDERS Autodesk to pay $322,000 in attorneys' fees and expenses to z4, as well as $18,000,000 in actual damages. Additionally, the Court ORDERS Autodesk and Microsoft to pay prejudgment interest on the actual damages found against each Defendant at the prime rate as of August 18, 2006 compounded monthly and calculated from the date of infringement for the accused products through the date final judgment is entered in this case.
*28 The Court DENIES AS MOOT z4's Emergency Motion to Strike Docket Entry 344; Autodesk and Microsoft's Emergency Opposed Motion for the Court to Consider the Expert Report of Walter Bratic Relating to Docket Nos. 321 and 323; and z4's Motion and Memorandum in Support to Unseal Findings Related to z4's Motion for Permanent Injunction for Docket Entries 346, 347, 353, 370, and 371.
So ORDERED and SIGNED this 18th day of August, 2006.