Irvine’s Uniloc USA Inc., a maker of security, anti-piracy and fraud prevention software, claimed a final victory Tuesday in its long-running legal battle with software kingpin Microsoft Corp.
A federal appeals court affirmed that Microsoft infringed on a Uniloc patent and used Uniloc’s product-activation technology in its Windows XP and Office XP products.
“We are very pleased with the ruling by the U.S. Court of Appeals for the Federal Circuit,” Uniloc Chief Executive Brad Davis said. “This decision illustrates how large corporations, like Microsoft, have knowingly infringed on our technology for financial gain. We are proud of the work that we have accomplished since our founding and will continue to vigorously defend our existing and future innovations.”
The Microsoft lawsuit, originally filed in 2003, stems from a patent Uniloc’s Australian founder secured in the 1990s for a process that’s become the standard for preventing software piracy.
Uniloc pioneered the idea of using a 25-character product key or serial number embedded into each copy of a disk loaded with software. The key seeks to ensure there’s only one registered user per copy of the software and limit it to being loaded on a select number of devices.
Uniloc’s patent only has a couple of years left before it comes to the end of its life. After that, Uniloc can’t sue to enforce the patent or collect royalties.
In 2009, a federal court in Rhode Island found Microsoft guilty of patent infringement and a jury awarded Uniloc $388 million in damages plus $86 million in interest.
Microsoft appealed later that year, and the verdict and award were overturned.
Uniloc appealed that decision in a higher federal court, which brought the most recent win and ended the protracted battle.
In an interesting twist, the U.S. Court of Appeals for the Federal Circuit—a specialized court that handles patent appeals—may have set a new precedent for the awarding of damages in patent infringement cases.
The court said it will end the use of a commonly used “rule of thumb” in tallying damages, which says the infringing company should pay 25% of expected profits on the product using the patent.
The court said in a published opinion that the rule “is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.”
It’s unclear what this means for Uniloc.
Next on deck, a federal judge will hold a separate hearing to determine what damages should be awarded to Uniloc.
A date for the hearing hasn’t yet been set, according to a Uniloc spokesman.
The Microsoft case brought the small company out of anonymity.
With yearly sales of about $100 million, Uniloc got billed as the victor in a David and Goliath drama.
In the past six months, Uniloc has gone after more than 100 other software makers in lawsuits alleging infringement on the same patent.
Companies named in the latest suits include Sony Corp., Activision Blizzard Inc., McAfee Inc., Adobe Systems Inc., Symantec Corp., as well as many other smaller software names.
Uniloc is seeking damages and injunctions on selling products that contain allegedly infringing software, according to the lawsuits.
About half of the companies named in the suits have settled and struck licensing pacts with Uniloc.
