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EOLAS TECHOLOGIES INC. v. MICROSOFT CORP.

January 14, 2004.

EOLAS TECHOLOGIES INCORPORATED, and THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, Plaintiffs,
v.
MICROSOFT CORPORATION, Defendant



The opinion of the court was delivered by: JAMES ZAGEL, District Judge

MEMORANDUM OPINION AND ORDER CONSOLIDATED RULINGS ON POST-TRIAL MOTIONS
Post Trial Motions of Microsoft

1. Judgment As a Matter of Law and For a New Trial

This motion rehearses a series of arguments that failed the first time around. The papers before me are, for the greatest part, a re-briefing of what has already been thoroughly argued and, in my view, correctly decided. The primary purpose of this motion is to avoid claims of waiver if the judgment is appealed, and it will be another court that decides whether this purpose has been Page 2 achieved.*fn1 The secondary purpose of this motion is to cite decisions not available at the time of the original claim construction with the hope that a change in law means a change in result.

  That being said, I must review this motion and apply the widely held standards for JMOL and a new trial. JMOL is appropriate "where there can be but one conclusion from the evidence." McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 564 (7th Cir. 2003)(citation omitted). When reviewing a motion for JMOL, 1 must consider "whether the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient to support the verdict when viewed in the light most favorable to the party against whom the motion is directed." Goodwin v. MTD Prods., 232 F.3d 600, 606 (7th Cir. 2000)(citations omitted). A new trial is appropriate where the verdict is "against the manifest weight of the evidence." Billy-Bob Teeth, v. Novelty, Inc. 329 F.3d 586, 591 (7th Cir. 2003). I may not overturn a jury's verdict so long as it has. a "reasonable basis in the record." Westchester Fire Ins. Co. v. General Star Indem. Co., 183 F.3d 578, 582 (7th Cir. 1999).

  As is demonstrated by the standards above, our judicial practice requires a high level of deference to the findings of a jury. These standards place a heavy burden on moving parties, like Page 3 Microsoft. Despite Microsoft's best arguments, I adhere to my prior evidentiary rulings and my decisions excluding certain defenses from the case submitted to the jury, and I find there has been no material change in the law that would support another outcome in this case.

  Finally, in asking for a new trial, Microsoft argues that there were errors in jury instructions concerning inducement of infringement. Given the whole set of instructions, I can not see how any jury could find Microsoft liable without first determining that Microsoft actively induced infringement. Accordingly, I do not perceive any error in the jury instructions.

 2. New Trial with Respect to Damages or, in the Alternative, for Remittitur

  The amount of damages based on a reasonable royalty is an issue of fact, Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387, 1394 (Fed. Cir. 2003), over which the jury has a great amount of discretion, Liu v. Price Waterhouse LLP, 302 F.3d 749, 756 (7th Cir. 2002). The damages awarded by this jury are, in absolute terms, very large. However, one could argue that, in relative terms, that $1.47 is a relatively modest portion of a $60.00 selling price but relative terms are relative terms. I am unwilling to say that roughly 2.5% of $60.00 is either modest or immodest. In my view, the amount is not so huge in relative or absolute terms that the law will not countenance it, so I do not base any part of my decision on the size of the award per se. See State Farm Mut. Auto. Ins. Co., v. Campbell, 123 S.Ct. 1513 (U.S. 2003).

  Microsoft argues against the validity of any damage calculation wherein the value of a complex, multi-functional product is the base from which a percentage is extracted — the percentage being the commercial value of a single infringing functionality. Microsoft has an institutional concern over such calculations because, as is widely known, it bundles together all Page 4 of its Windows functionality as seamlessly as it can. It argues that this bundling is good engineering; others argue that it has a more nefarious purpose. Whatever the truth, the bundling makes it very difficult for either party to assess the value of each individual component.*fn2 Since Microsoft has created this difficulty for itself, it must bear the legal risks attendant to its way of business. At times, Microsoft's arguments seemed to border on proposing that an infringer could wrap together, in a single product, 150 technological innovations without having to any pay a cent in royalties so long as each innovation contributed only a small part of the product's overall value and was not itself a standalone product. But, few would be willing to adopt this position explicitly.

  Microsoft seems to propose, in the alternative, that even if it must bear the consequences of its bundling policy, a jury should not be invited to determine the percentage of Windows or Internet Explorer's value that is attributable to Eolas's invention. In short, Microsoft argues that, for damages to be appropriate, the accused technology must contribute in some meaningful way to consumer demand for Windows or Internet Explorer. Here, Microsoft claims Eolas has failed to show that its invention made a meaningful contribution and, thus, is not entitled to damages. Microsoft's experts made this point by arguing that automatic invocation of an application saved only a mouse click or two and could not be regarded as a meaningful addition to Windows. Certainly, this argument has some force. The jury may have accepted this argument as it did assess a royalty rate far below the one asked for by Eolas. In the end, even Microsoft's own experts did not really declare that Eolas's invention was of no value to Windows or Internet Page 5 Explorer. At trial, sufficient evidence was presented from which the jury could infer that Microsoft itself saw significant value in the functionality at issue.

  Microsoft's final arguments are that the jury's verdict makes no sense in light of the royalty paid to Spyglass for a license to use an entire browser technology, that the royalty far exceeds the amount of money Microsoft invests in its annual research budget, that Microsoft could have achieved the same functionality in a different way and that Eolas could not sell the technology on its own. These arguments too are not without force but have already been considered and rejected by the jury.

  While I am not entirely comfortable with the large size of the judgment, it is not my comfort which matters. See Oiness v. Walgreen Co. 88 F.3d 1025 (Fed. Cir. 1996). Both sides presented complex chains of evidence that could have supported a significantly higher or significantly lower value than the one that appeared on the verdict. Exactitude is difficult in all damage cases, and it was made far more difficult here by the way Microsoft sells Windows. However, it was not outside the ability of a jury to make a rational judgment. The jury, to whom the decision was submitted, conscientiously reached a verdict as to the running royalty that was within the realm of reason.

 3. Motion to Exclude Foreign Sales

  Microsoft has moved for judgment as a matter of law of noninfringement with respect to products made and sold outside the United States and argues that, in light of new Federal Circuit precedent, I must reconsider and reverse my earlier decision in Eolas Techs. Inc. v. Microsoft Corp., No. 99 C 626, 2003 U.S. Dist. LEXIS 13482 (N.D. Ill. Aug. 1, 2003). In that decision, I Page 6 found infringement damages could be awarded, pursuant to 35 U.S.C. § 271, for units of Windows ...


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