WESTICRs
`
`2010-1035,
`
`-1055
`
`IN THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`INC. and
`USA,
`UNK_C
`UNILOC SINGAPORE
`PRIVATE LIMITED,
`
`F'fB..04 2010
`
`Plaintiffs-Appellants,
`
`Vo
`
`MICROSOFT
`
`CORPORATION,
`
`Defendant-Cross
`
`Appellant.
`
`Appeals
`of Rhode
`
`for the
`States District Court
`from the United
`Island
`in case no. 03-CV-0440,
`Judge William E. Smith.
`
`District
`
`BRIEF
`UNILOC
`
`FOR UNILOC
`SINGAPORE
`
`USA,
`PRIVATE
`
`INC.
`and
`LIMITED
`
`Paul J. Hayes
`Dean G. Bostock
`Mxtcrz, LSVIN, COHN, FERIUS,
`GLOVSKY& POPEO,PC
`One Financial Center
`Boston, MA 02111
`(617) 542-6000
`
`February 4, 2010
`
`Donald R. Dunner
`Don O. Burley
`FINNr_AN, HENDERSON,FARABOW,
`GARRETT& DUNNERwLLP
`901 New York Avenue, NW
`Washington, DC 20001
`(202) 408-4000
`
`Erik R. Pulmys
`Aaron Capron
`FINNEGAN,HENDERSON,FARABOW,
`GARRETr& DUNNI_ LLP
`3300 HiUview Avenue
`Pain Alto, CA 94304
`(650) 849-6600
`
`for Plaintiff_-Appellants
`Attorneys
`Uniloc USA, Inc. and Uniloe
`Singapore Private Limited
`
`Petitioner Ex. 1037 Page 1
`
`

`
`CERTIFICATE
`
`OF INTEREST
`
`Counsel
`Limited,
`certi_
`
`for appellants,
`the following:
`
`Uniloc USA,
`
`Inc. and Uniloc
`
`Singapore
`
`Private
`
`1.
`
`The full name of every party or amicus represented
`
`by us is:
`
`Uniloc USA,
`
`Inc. and Uniloc Singapore Private Limited
`
`2.
`
`The name of the real party in interest
`the real party in interest)
`represented
`
`(if the party named in the caption is not
`by us is:
`
`N/A.
`
`a
`
`1
`
`that own 10 percent
`and any publicly held companies
`All parent corporations
`or more of the stock of the party or amicus
`curiae represented by us are:
`
`Uniloc Corporation Pty. Ltd.
`USA and Uniloc Singapore.
`
`is the parent company
`
`of both Uniloc
`
`No publicly held company
`or Uniloc Singapore.
`
`owns
`
`10% or more of either Uniloc USA
`
`that appeared for
`law firms and the partners or associates
`The names of all
`the party or amicus now represented
`by us in the trial court or agency or are
`to appear in this court are:
`expected
`
`and Er/k Pulmys
`Donald R. Dunner, Don O. Burley,
`FnO____AN, HENDERSON, FARABOW, GAm_Tr & _
`
`LLP
`
`IH, and Shed L. Piz.zi
`Andria Coletta, Francis A. Connor,
`TAYLOR, DUANE, BARTON & GILMAN, LLP
`
`Dean G. Bostock, Paul J. Cronin, Paul J. Hayes, and
`Eugene A. Feher
`MINTZ, LBVIN, COHN, FERRIS, GLOVSKY & POPEO, PC
`
`Petitioner Ex. 1037 Page 2
`
`

`
`TABLE OF CONTENTS
`
`CERTIFICATE OF INTEREST ................................................................................
`
`TABLE OF AUTHORITIES
`
`.....................................................................................
`
`i
`
`v
`
`STATEMENT OF RELATED CASES .................................................................
`
`viii
`
`I.
`
`II.
`
`IH.
`
`IV.
`
`STATEMENT OF JURISDICTION
`
`...............................................................
`
`PRELIMINARY
`
`STATEMENT
`
`.....................................................................
`
`STATEMENT OF THE ISSUES ....................................................................
`
`STATEMENT
`
`OF THE CASE .......................................................................
`
`A.
`
`B.
`
`The Parties and Their Products
`
`.............................................................
`
`Course of Proceedings
`
`and Disposition
`
`Below .....................................
`
`V.
`
`STATEMENT OF FACTS ..............................................................................
`
`The '216 Patent
`
`.....................................................................................
`
`Microsofl's
`
`Study of Uniloc's Anti-Piracy Concept
`
`...........................
`
`12
`
`1
`
`1
`
`3
`
`6
`
`6
`
`7
`
`7
`
`7
`
`13
`
`14
`
`15
`
`17
`
`21
`
`22
`
`25
`
`25
`
`25
`
`A.
`
`B.
`
`C.
`
`After Studying
`the Accused
`Microsoft Develops
`Technology
`Uniloc's
`Software ................................................................................
`
`D.
`
`Mierosoft's
`
`Product Activation ...........................................................
`
`I.
`
`Mierosoft'sEULA ....................................................................
`
`2.
`
`How Product Activation Works ................................................
`
`E.
`
`F.
`
`G.
`
`The Success
`
`of Mierosoft's
`
`Product Activation
`
`System .....................
`
`First Summary
`
`Judgment Order and Appeal
`
`.......................................
`
`Proceedings
`
`on Remand ......................................................................
`
`1.
`
`Trial ...........................................................................................
`
`a.
`
`Infringement
`
`...................................................................
`
`ii
`
`Petitioner Ex. 1037 Page 3
`
`

`
`(1)
`
`(2)
`
`(3)
`
`"Licensee Unique ID" ..........................................
`
`25
`
`The"Licensee Unique ID Generating
`Moans" ..................................................................
`
`System" and "Mode Switching
`"Registration
`Means" ..................................................................
`
`b.
`
`c.
`
`d.
`
`Invalidity .........................................................................
`
`Damages
`
`.........................................................................
`
`Willfulness ......................................................................
`
`u
`
`3.
`
`The Jury's Verdict .....................................................................
`
`The District Court's Order Granting JMOL and, in the
`Alternative, a New Trim ...........................................................
`
`am
`
`Infringement
`
`...................................................................
`
`(1)
`
`(2)
`
`"Licensee Unique ID Generating Means" ............ 39
`
`System" Using "Mode
`"Registration
`Switching Means" ................................................
`
`29
`
`32
`
`33
`
`34
`
`36
`
`38
`
`38
`
`39
`
`42
`
`44
`
`47
`
`49
`
`51
`
`51
`
`bm
`
`Cm
`
`Willful Infringement .......................................................
`
`Contingent Grant of a New Trial ....................................
`
`V_m
`
`SUMMARY
`
`OF
`
`ARGUMENT
`
`.......................................................
`
`..............
`
`VII. ARGUMENT .................................................................................................
`
`Standard of Review .............................................................................
`
`al
`
`B.
`
`The Jury's Infringement Verdict Should Be Reinstated ..................... 52
`
`1
`
`o
`
`The District Court Ignored this Court's Mandate fi'om the
`Prior Appeal ..............................................................................
`
`Substantial Evidence Supported the Jury's Determination
`That the Accused Software Includes "Licensee Unique
`ID Generating Means" ..............................................................
`
`52
`
`53
`
`111
`
`Petitioner Ex. 1037 Page 4
`
`

`
`at
`
`bl
`
`Cl
`
`Substantial Evidence Showed That the MD5/SHA-
`1 Algorithms Are Summation Algorithms ..................... 54
`
`The District Court's JMOL Construction Conflicts
`with the Intrinsic Evidence .............................................
`
`Even Under the District Court's Post-Trial
`Construction, There Was Sufficient Evidence to
`Support the Verdict .........................................................
`
`55
`
`56
`
`Products Have a
`Substantial Evidence Showed That Microsofl's
`System" Using "Mode Switching Means" ................... 58
`"Registration
`
`Substantial Evidence Supported the Jury's Willfulness Finding ........ 60
`
`The District Court Erred in Granting a New Trial ..............................
`
`Ci
`
`D.
`
`E.
`
`63
`
`69
`
`VIII. CONCLUSION ..............................................................................................
`
`iv
`
`Petitioner Ex. 1037 Page 5
`
`

`
`TABLE OF AUTHORITIES
`
`CmsN
`
`Ahem v. $cholz,
`85 F.3d 774 (lst Cir. 1996) .................................................................................
`
`"sAss 'n, AFL-CIO,
`Allied lnt 7, Inc. v. Int 7 Longshoremen
`814 F.2d 32 (lst Cir. 1987) .................................................................................
`
`Inc.,
`Inc. v. Barnesandnoble.com,
`Amazon.corn,
`239 F.3d 1343 (Fed. Cir. 2001)
`..........................................................................
`
`Inc. v. Empak,
`Inc.,
`Asyst Techs.,
`268 F.3d 1364 (Fed. Cir. 2001)
`
`..........................................................................
`
`v. Mary Hitchcock Mem 7 Hosp.,
`Brookover
`893 F.2d 411 (lst Cir. 1990)
`...............................................................................
`
`v. AFzcrostrategy
`Inc.,
`S.A.
`Objects,
`Business
`393 F.3d 1366 (Fed. Cir. 2005)
`..........................................................................
`
`Inc.,
`Coffran v. Hitchcock Clinic,
`683 F.2d 5 (lst Cir. 1982) ...................................................................................
`
`Inc.,
`Sofamor Danek,
`Inc. 1,. Medtronic
`Depuy Spine,
`567 F.3d. 1314 (Fed. Cir. 2009)
`.........................................................................
`
`v. Welsh Sporting Goods Corp.,
`Droeger
`541 F.2d 790 (gth Cir. 1976)
`..............................................................................
`
`1,. Package Mach. Co.,
`Freeman
`865 F.2d 1331 (lst Cir. 1988)
`
`............................................................................
`
`67
`
`65
`
`61
`
`57
`
`65
`
`57
`
`68
`
`62
`
`37
`
`65
`
`Inc.,
`Co. v. Mustek 8ys.,
`Hewlett-Packard
`340 F.3d 1314 (Fed. Cir. 2003)
`...................................................................
`
`53, 54
`
`Corp.,
`I,. Microsoft
`i4i Ltd. P'ship
`No. 6:07CVl13,
`2009 U.S. Dist. LEXIS 70104
`(E.D. Tex. Aug. 11, 2009),aff'd
`in part,
`in part and modified
`589 F.3d 1246 (Fed. Cir. 2009)
`..........................................................................
`
`61
`
`Petitioner Ex. 1037 Page 6
`
`

`
`IMS Tech., Inc. v. Haas Automation,
`206 F.3d 1422 (Fed. Cir. 2000)
`
`Inc.,
`..........................................................................
`
`58
`
`In re Seagate Tech., LLC,
`497 F.3d 1360 (Fed. Cir. 2007)
`
`.....................................................................
`
`4, 61
`
`v. Jones,
`2ennings
`587 F.3d 430 (1st Cir. 2009)
`
`...............................................................................
`
`v. Set-Jobs
`Inc.,
`for Progress,
`Keisling
`19 F.3d 755 (lst Cir. 1994)
`.................................................................................
`
`1,. City of New York,
`Kerman
`374 F.3d 93 (2d Cir. 2004)
`
`.................................................................................
`
`Inc.,
`Lucent Techs. v. Gateway,
`580 F.3d 1301 (Fed. Cir. 2009)
`
`..........................................................................
`
`v. Goya of Puerto Rico,
`Inc.,
`Marrero
`304 F.3d 7 (lst Cir. 2002)
`...................................................................................
`
`v. City of Providence,
`O'Rourke
`235 F.3d 713 (1st Cir. 2001)
`
`...............................................................................
`
`Inc.,
`Plumbing Prods.,
`1,. Sanderson
`Reeves
`530 U.S. 133 (2000)
`............................................................................................
`
`Inc. 1,. Stanley Works,
`Roton Barrier,
`79 F.3d 1112 fled. Cir. 1996)
`............................................................................
`
`51
`
`51
`
`52
`
`65
`
`55
`
`51
`
`52
`
`37
`
`SanDisk Corp. v. Memorex Prods.,
`415 F.3d 1278 (Fed. Cir. 2005)
`
`Inc.,
`...................................................................
`
`56, 60
`
`$1imfold Mfg. Co. v. Kinkead
`lndus.,
`932 F.2d 1453 (Fed. Cir. 1991)
`
`Inc.,
`..........................................................................
`
`Inc. v. A.O. Smith Corp.,
`State Indus.,
`751 F.2d 1226 (Fed Cir. 1985)
`...........................................................................
`
`Inc. v. eSpeed,
`Trading Techs. Int'l,
`2008 WL 63233
`No. 04-C-5312,
`(N.D.
`Ill. Jan. 3, 2008)
`........................................................................................
`
`Inc.,
`
`66
`
`45
`
`45
`
`vi
`
`Petitioner Ex. 1037 Page 7
`
`

`
`Union Carbide Chems. & Plastics Tech. Corp. v. Shell Oil Co.,
`425 F.3d 1366 (Fed. Cir. 2005)
`..........................................................................
`
`51
`
`United Stat_ v. Riccio,
`529 F.3d 40 (1st Cir. 2008) ..........................................................................
`
`66, 68
`
`WMS Gaming Inc. v. Int 7 Game Tech.,
`184 F.3d 1339 (Fed. Cir. 1999) ..........................................................................
`
`51
`
`Statutes
`
`28 U.S.C. § 1295(a)(1) ...............................................................................................
`
`28 U.S.C. § 1331 ........................................................................................................
`
`28 U.S.C. § 1338(a)
`
`...................................................................................................
`
`28 U.S.C. § 2107 ........................................................................................................
`
`Rules
`
`Fed. R. App. P. 4(a) ...................................................................................................
`
`Fed. R. Civ. P. 103(a)(1) ..........................................................................................
`
`1
`
`1
`
`1
`
`1
`
`1
`
`65
`
`vii
`
`Petitioner Ex. 1037 Page 8
`
`

`
`STATEMENT OF RELATED CASES
`
`This case has previously been before this Court
`
`in Appeal No. 2008-1121.
`
`In an unpublished decision dated August 7, 2008, a split panel of
`
`this Court
`
`reversed and remanded the district court's grant of summary judgment
`
`in favor of
`
`Microsoft but affirmed the district court's denial of Uniloc's motion for recusal.
`
`The decision on appeal
`
`is reported at 290 Fed. Appx. 337, 2008 U.S. App. LEXIS
`
`16938, and 2008 WL 3539749, and is reproduced in the Joint Appendix at A4958-
`
`79.
`
`After the district court entered the final judgment
`
`that is the subject of the
`
`present appeal, Uniloc
`
`filed two new, presently pending, district
`
`court actions
`
`involving
`
`the same patent
`
`involved here, U.S. Pat. No. 5,490,216
`
`("the '216
`
`patent"):
`
`Case No. 6:09cv538
`
`(E.D. Tex.) against the following defendants:
`
`Abbyy
`
`USA Software House,
`
`Inc.; CommonTime,
`
`Inc.; No Magic,
`
`Inc.; GFI USA,
`
`Inc.
`
`(dba GFI
`
`Software USA);
`
`Systran
`
`Software,
`
`Inc;
`
`Systran U.S.A.
`
`Inc.;
`
`WORDsearch Corp, LLC; T.A.L. Technologies,
`
`Inc.
`
`(dba TALtech); CIOview
`
`Corp.; Punch Software LLC; Maketech Systems,
`
`Inc.
`
`(dba Docudesk Corp.);
`
`Kidasa Software, Inc.; and InternetSafety.com,
`
`Inc.
`
`Civil Action 6:10cv18 (E.D. Tex.) against
`
`the following defendants:
`
`BCL
`
`Technologies; Honcstech Inc.; GlobalSCAPE,
`
`Inc.; Argus Software,
`
`Inc; Software
`
`VUl
`
`Petitioner Ex. 1037 Page 9
`
`

`
`Shapers,
`
`Inc.
`
`(dba "Pygraphics");
`
`QuadriSpace Corp.; Real Software,
`
`Inc.; G7
`
`Productivity
`
`Systems; HumanConcepts LLC; Siber Systems
`
`Inc.; Alien Skin
`
`Software, LLC; Algorithmic
`
`Implementations,
`
`Inc.
`
`(dba Ai Squared);
`
`and
`
`MacKichan Software, Inc.
`
`ix
`
`Petitioner Ex. 1037 Page 10
`
`

`
`L
`
`STATEMENT OF JURISDICTION
`
`The district court had jurisdiction
`
`under 28 U.S.C. §§ 1331 and 1338(a).
`
`Uniloc
`
`timely filed its appeal
`
`from the district
`
`court's
`
`final decision under 28
`
`U.S.C. § 2107(a) and Feel R. App. P. 4(a). This Court has exclusive jurisdiction.
`
`28 U.S.C. § 1295(a)(1).
`
`IL
`
`PRELIMINARY
`
`STATEMENT
`
`Uniloc's patent relates to a registration system that prevents unauthorized
`
`"casual
`
`copying"---the
`
`use of
`
`software by a person who has
`
`"borrowed"
`
`an
`
`authentic
`
`installation
`
`disk from a licensed user.
`
`Uniloc's
`
`system prevents
`
`unauthorized copying by combining a user's unique identifier and information
`
`about his computer to create a security key that cannot be duplicated on another
`
`computer,
`
`even if the licensee has shared his unique identifier with someone else.
`
`In 1993, Microsoft, which at the time was losing more than $3.5 billion per
`
`year to casual copying, reviewed Uniloc's
`
`technology. During Microsofl's
`
`review,
`
`however,
`
`it violated
`
`its NDA with Uniloc,
`
`'_acldng"
`
`into Uniloc's
`
`software to
`
`study its code. And shortly afterwards, Microsoft--under
`
`the leadership of an
`
`employee with no prior experience in anti-piracy
`
`systems who admittedly studied
`
`third-party solutions
`
`submitted to Microsoft---developed
`
`"Product Activation," an
`
`anti-piracy
`
`technology
`
`that prevents unauthorized copying in the same way as
`
`Uniloc's
`
`technology,
`
`combining
`
`a user's unique identifier and information about
`
`Petitioner Ex. 1037 Page 11
`
`

`
`his computer to create a security key. Product Activation has been an enormous
`
`success
`
`for Microsoft,
`
`allowing Microsoft
`
`to generate more than $4.6 billion in
`
`additional profits during the five-year damages period of this case.
`
`The jury heard this evidence,
`
`as well as Microsofl's
`
`defenses, which
`
`consisted of noninfiingement
`
`defenses
`
`rejected by this Court in a prior decision
`
`and contradicted by Microsoft
`
`documents,
`
`as well
`
`as half-hearted
`
`invalidity
`
`defenses
`
`lacking
`
`fundamental
`
`requirements,
`
`such as
`
`l'unitation-by-rurdtation
`
`analyses of the prior art or any explanation for why the prior art would have been
`
`combined to create the claimed invention. Not surprisingly,
`
`the jury decided that
`
`Microsoft was a willful
`
`infringer and awarded Uniloc $388 million in damages,
`
`amounting
`
`to about 2% of Microsoft's
`
`revenues
`
`from the infringing uses of
`
`Product Activation.
`
`Until
`
`the verdict,
`
`the district
`
`court praised the jury, noting that some jurors
`
`"had a high opinion of Microsoft" and allowing the jurors to ask the experts
`
`questions.
`
`After the verdict, however,
`
`the court reversed course and granted
`
`JMOL, finding that the jury "lacked a grasp of the issues before it." The court's
`
`reasons
`
`for granting _/IOL,
`
`however,
`
`cannot withstand scrutiny, since it clearly
`
`engaged
`
`in re-weighing
`
`the evidence.
`
`Specifically,
`
`the court's decision
`
`consists
`
`mostly
`
`of explanations
`
`for why it did not
`
`find Uniloc's
`
`evidence
`
`especially
`
`compelling and comparisons
`
`of the relative credibility of the parties' experts. But
`
`2
`
`Petitioner Ex. 1037 Page 12
`
`

`
`the law does not permit a judge to substitute its factual findings for the jury's so
`
`the judgment must be reversed for this reason alone.
`
`The court committed other, more fundamental errors as well.
`
`Specifically,
`
`its decision cannot be reconciled with this Court's previous decision in this case or,
`
`more broadly,
`
`this Court's precedents on claim construction.
`
`In sum, the district
`
`court committed numerous
`
`errors in nullifying
`
`the jury's verdict and granting
`
`Microsoft a new trial. Accordingly,
`
`its judgment must be reversed and the jury
`
`verdict re'restated.
`
`ElL
`
`STATEMENT OF THE ISSUES
`
`1.
`
`The asserted claim requires a "licensee unique ID generating means,"
`
`which the district court construed as a means-plus-function
`
`limitation whose
`
`corresponding structure requires "a summation algorithm" or its equivalent.
`
`In a
`
`prior appeal, Microsoft argued that the accused products lack this limitation as a
`
`matter of law. This Court rejected Micmsofl's
`
`argument as "without merit." On
`
`remand,
`
`evidence
`
`showed that
`
`the accused products'
`
`algorithms
`
`employ
`
`two
`
`primary steps, a summation step and a multiplication
`
`step (which is iterative
`
`addition,
`
`i.e., 3x3=3+3+3),
`
`repeated over and over. Evidence also showed that
`
`those
`
`skilled in the art considered the accused algorithms
`
`to be "summation
`
`algorithms," and Microsofl's
`
`own documents
`
`state that the algorithms produce "a
`
`value that is the summation of a byte stream."
`
`3
`
`Petitioner Ex. 1037 Page 13
`
`

`
`Did the district court err by (a)
`
`finding,
`
`contrary to this Court's prior
`
`decision,
`
`that the accused algorithms cannot, as a matter of law, meet the "licensee
`
`unique ID limitation," and (b) determining that no substantial evidence
`
`supported
`
`the jury's determination that the accused products included summation algorithms
`
`or their equivalents7
`
`2.
`
`The asserted claim also recites a "registration
`
`system" (which allows
`
`"full use" of software in accordance with a license only if an appropriate liceming
`
`procedure has been followed)
`
`and "mode
`
`switching means" (which switches
`
`the
`
`software from a mode having limited functionality to a fully functional mode).
`
`Uuiloc showed that initially,
`
`the accused software cannot perform all of its licensed
`
`functions
`
`(e.g.,
`
`the software
`
`cannot be updated even though the license
`
`covers
`
`updates).
`
`After a "Product Activation" procedure
`
`that the license
`
`itself
`
`calls
`
`"mandatory"
`
`is followed, however,
`
`the software becomes "fully functional" and all
`
`the licensed features become available.
`
`Did the district court err in finding that a user of the accused
`
`software has
`
`"full use of the software in accordance with the license" before activation,
`
`and thus
`
`that no substantial evidence supported the jury's finding that the accused software
`
`included a "registration
`
`system" or ''mode switching means"?
`
`3.
`
`The jury, properly instructed
`
`on the two-prong test of In re Seagate
`
`Tectmologiea,
`
`LLC,
`
`497 F.3d
`
`1360
`
`(Fed. Cir.
`
`2007),
`
`heard Microsofl's
`
`4
`
`Petitioner Ex. 1037 Page 14
`
`

`
`noninfringement
`
`theories, which were inconsistent with this Court's prior decision,
`
`the district court's
`
`construction,
`
`and Micrnsoft's own documents.
`
`It further heard
`
`Microsoft's
`
`invalidity theories, which were presented by an expert who failed to
`
`discuss
`
`every claim limitation or explain why certain prior art would have been
`
`combined to make the invention obvious, and it heard evidence
`
`that Microsoft had
`
`access
`
`to Uniloc's
`
`technology
`
`and violated
`
`an NDA covering it shortly before a
`
`Microsoft
`
`employee with no relevant
`
`experience
`
`supposedly
`
`"independently"
`
`developed
`
`Product Activation, which was
`
`remarkably
`
`similar
`
`to Uniloc's
`
`technology.
`
`Did the dislrict court err in concluding that (a) no reasonable juror could find
`
`that Microsoft was
`
`"objectively"
`
`reckless,
`
`and (b)
`
`there was no substantial
`
`evidence supporting an inference of copying?
`
`4.
`
`Uniloc's
`
`damages
`
`expert
`
`testified,
`
`based on Microsoft documents,
`
`that Microsoft
`
`valued Product Activation
`
`at $10 per infiinging
`
`use. When
`
`the resulting royalty was calculated to be $565 million, Uniloc's
`
`expert checked
`
`its reasonableness
`
`by calculating
`
`that
`
`the
`
`effective
`
`royalty amounted to just
`
`2.9%of
`
`the
`
`$19 billion
`
`in revenue
`
`attributable
`
`to
`
`the
`
`accused
`
`products.
`
`Microsoft never objected to this testimony and,
`
`in fact, affirmatively relied on the
`
`"check"
`
`for its own expert's testimony.
`
`Finding that Uniloc's
`
`expert "crossed the
`
`line," the district
`
`court said that "Microsoft
`
`objected specifically"
`
`to Uniloc's
`
`5
`
`Petitioner Ex. 1037 Page 15
`
`

`
`expert's
`
`"check,"
`
`although the trial transcript reveals
`
`the opposite: Microsofl's
`
`counsel
`
`twice
`
`told the district court that Microsoft had "no objection" to this
`
`testimony.
`
`Did the district court abuse its discretion
`
`in relying on this "finding,"
`
`together with its findings on the summation and copying issues,
`
`to grant Microsoft
`
`a new trial?
`
`IV.
`
`STATEMENT OF THE CASE
`
`A.
`
`The Par/its
`
`and Their Products
`
`Uniloc Singapore Private Limited is the assignee of the '216 patent, which is
`
`exclusively
`
`licensed to Uniloc USA, a California company that develops anti-
`
`piracy technology.
`
`A1364-66;A301.
`
`The Uniloc
`
`companies were founded by
`
`Frederick "Ric" Richardson,
`
`an Australian software
`
`developer
`
`and the
`
`'216
`
`patent's inventor.
`
`Id.
`
`Microsoft
`
`licenses
`
`the accused software, versions of Windows and Office
`
`that include a feature called Product Activation for preventing "casual
`
`copying."
`
`A1284;A1298-99;A1334-35;A2211;A4459.
`
`A study
`
`released
`
`just
`
`before
`
`Microsoft began including Product Activation in Windows and Office reported that
`
`Microsoft was
`
`losing more than $3.5 billion annually
`
`from casual
`
`copying.
`
`A1648-50;A2211.
`
`6
`
`Petitioner Ex. 1037 Page 16
`
`

`
`B.
`
`Course of Proceedings and Disposition Below
`
`Uniloc
`
`sued Microsoft
`
`in September 2003 for infi'ingement
`
`of
`
`the '216
`
`patent.
`
`A209. Microsoft
`
`counterclaimed,
`
`seeking declaratory judgments
`
`of
`
`noninfringmnent,
`
`invalidity, and unenf_bility.
`
`A209.
`
`In October 2007,
`
`the
`
`district
`
`court
`
`granted Microsoft's
`
`motion
`
`for
`
`summary
`
`judgment
`
`of
`
`noninfi'ingmnent, which was reversed by a split panel of this Court. A4958-79.
`
`On rmnand, a jury found that Microsoft willfully
`
`infringed claim 19 (the
`
`only claim then at issue) and Microsoft
`
`failed to prove that claim 19 was invalid.
`
`A91-95.
`
`The jury awarded $388 million in damages.
`
`A95. Microsoft
`
`filed
`
`post-trial motions
`
`seeking 3MOL and a new trial on all issues. A243. The district
`
`court granted Microsoft's motions
`
`in part, entering
`
`JMOL of noninfringement
`
`and no willfulness
`
`and conditionally
`
`granting Microsoft
`
`a new trial
`
`on
`
`infringement
`
`and damages. A38;A44;A53;A62.
`
`Later,
`
`the
`
`court
`
`dismissed
`
`Microsoft's
`
`inequitable-conduct
`
`counterclaim without prejudice as moot. A4732-
`
`33;A6346-47.
`
`V.
`
`STATEMENT OF FACTS
`
`A.
`
`The '216 Patent
`
`The '216 patent relates
`
`to a system for preventing casual copying.
`
`Figure 8
`
`illustrates one embodiment:
`
`7
`
`Petitioner Ex. 1037 Page 17
`
`

`
`A311.
`
`A "local
`
`licensee
`
`location"
`
`(a user's/licensee's
`
`computer)
`
`and a "remote-
`
`registration
`
`database"
`
`(at the vendor's/licensor's
`
`computer) perform a registration
`
`procedure
`
`that causes
`
`software
`
`(digital
`
`data)
`
`to operate
`
`in "fully
`
`enabled" or "use"
`
`mode.
`
`A316[col.5:47-col.6:8];A320[col.13:42-48].
`
`Software
`
`running
`
`in "use
`
`mode" has all
`
`the functionality
`
`that the vendor must provide
`
`to the user according
`
`to the license between
`
`them.
`
`A314[coi.2:40-44].
`
`Initially, however,
`
`the so/lware
`
`is not
`
`in
`
`"use mode,"
`
`but
`
`in what
`
`the
`
`patent
`
`calls
`
`a "partly
`
`enabled
`
`or
`
`demonstration mode" (id.;A315[col.4:34-35])
`
`in which the user cannot access
`
`"all
`
`features of the software" (A316[coi.6:48-52]).
`
`8
`
`Petitioner Ex. 1037 Page 18
`
`

`
`A registration
`
`flow chart
`
`is
`
`illustrated in Figures
`
`2a-2c.
`
`A303-05.
`
`Registration cannot begin until the user is shown the terms of the license (shown as
`
`"BI" below) and agrees to continue. A316[col.6:60-63].
`
`FI@.
`
`I
`I
`
`%.I L_E
`Mm, _
`I m_LS OF_
`
`uc_.G
`
`FIG. 2a
`
`GO TO F1G.2b
`
`._03.
`
`After
`
`registration
`
`begins,
`
`the user's
`
`computer
`
`executes
`
`a summation
`
`algorithm to generate
`
`a security key, also referred to as a "local
`
`licensee
`
`unique ID," by combining
`
`various kinds of
`
`information,
`
`including
`
`information
`
`unique
`
`to the
`
`user.
`
`A312;A316[col.6:18-22];A315[col.3:65-col.4:5];A316-
`
`9
`
`Petitioner Ex. 1037 Page 19
`
`

`
`17[col.6:60-col.7:20];A319[co1.11:54-57].
`
`I Unique user information can include
`
`the product's serial number;information about the user (e.g., name, address); or a
`
`vendor-provided
`
`identifier
`
`contained,
`
`for
`
`example,
`
`on
`
`an installation
`
`disk.
`
`A307;A317[col.7:8-20];A319[col.12:51-65];A4969-70.
`
`The licensee unique ID
`
`can also be based on information
`
`about the user's computer, which helps prevent
`
`the user
`
`(or someone using his information)
`
`from installing
`
`the fully functional
`
`version of
`
`the
`
`software
`
`on another, unauthorized
`
`computer.
`
`A316[col.6:65-
`
`67];A317[coL7:1-5;col.8:29-38];A317[col.8:56]-A318[coL9:23].
`
`The vendor's remote registration station uses a "remote
`
`licensee unique ID
`
`generator" that is a duplicate of the summation algorithm on the user's
`
`computer.
`
`A311[Fig.8];A316[coL6:l-8].
`
`Processing
`
`the unique user
`
`information that
`
`it
`
`receives
`
`from the user's
`
`computer,
`
`the algorithm generates a remote
`
`licensee
`
`unique ID similar to the way the algorithm on the user's computer generates a local
`
`licensee unique ID. Id.
`
`After generating the remote licensee unique ID, the vendor's remote station
`
`provides
`
`remote
`
`security key to a mode
`
`switcher
`
`in the user's
`
`computer.
`
`A31 l[Fig.8].
`
`The mode switcher then determines whether the local and remote
`
`licensee unique IDs match. A316[col.6:12-14];A317[col.7:21-35].
`
`If they match,
`
`to generate the
`employ hardware called a "summer"
`Some embodiments
`!
`licensee
`unique
`ID (A319[coL12:62-65]),
`but
`this appeal
`only the
`involves
`software embodiment.
`
`10
`
`Petitioner Ex. 1037 Page 20
`
`

`
`mode switcher allows
`
`the user to have full use of the software. A317[col.7:36-
`
`51];A319[co1.11:63-65].
`
`If not,
`
`the user will be able to use the software only in
`
`demonstration mode. A317[coL7:46-51];A318[col.
`
`10:35-42].
`
`A user who has accepted the licensing terms (A316[col.6:60-63])
`
`and paid
`
`for the license
`
`(A317[coL7:10-14])
`
`will not necessarily be able to operate the
`
`software in use (fully functional) mode until additional steps are taken to complete
`
`the registration process.
`
`In Figure 2c, for example,
`
`the software will not operate in
`
`use mode unless
`
`the user manually types in the registration
`
`number that the
`
`software
`
`vendor provides.
`
`Until
`
`then,
`
`the software will
`
`continue
`
`to run in
`
`demonstration mode.
`
`FIG.2b
`
`mm.h
`
`t
`
`FIG. 2C
`
`nm r_ ,_
`
`N£ EEmN_
`t
`
`lUlN ill
`
`I
`
`f C
`
`EI'M.! i 11E[
`H
`INM6 mOiDm 10 INl111_ lIE pI_
`I(CIJ_
`clam_Tm
`O,mc
`mr., ai_Jn,
`ram&
`mmmmm.a..- ma.m
`
`I
`
`I
`
`I _aN
`
`usa u,u_a,a I
`
`I
`
`_
`c_
`
`I =.1 Imm._l
`
`I
`
`ImmL
`
`_uwo.l
`
`v
`
`I
`THE RI_ISTRATION NO. IS INCOHICT
`i_
`_0 ASm TO_ mz ommon FOe I
`I_
`OG'AIL,,%_
`'_ Al'11_Um'TO I
`_
`
`'ASMST_HCIEINCHI_.,IlaNOI_I_dlSTllIA11001I
`nmmlat kwllatVmlCHmz PRmt_
`i
`
`i
`
`I
`
`I nmtwo,
`
`nnicm,
`
`le
`
`I
`
`"""_'
`
`"-"
`
`IO'M I_
`
`Ib
`
`_..A_
`
`?_mo
`
`m,m I
`
`A304-05.
`
`11
`
`Petitioner Ex. 1037 Page 21
`
`

`
`At trial, Uniloc asserted claim 19 (the disputed terms are in bold):
`
`19. A remote registration station incorporating remote
`unique El) generating means,
`said station
`licensee
`forming part of a registration
`system for
`licensing
`execution of digital data in a use mode, said digital data
`executable
`on a platform,
`said system including
`local
`licensee
`unique
`ID generating means,
`said system
`further including mode
`switching means
`operable on
`said platform which permits use of said digital data in
`said use mode on said platform only if a licensee unique
`ID gonerated
`by
`said local
`licensee
`unique
`ID
`means has matched a licensee unique ID
`generating
`generated by said remote
`licensee unique ID generating
`means;
`and wherein said remote
`licensee
`unique
`ID
`generating means
`comprises
`software
`on a
`executed
`platform which includes
`the algorithm utilized by said
`local
`licensee unique ID generating means
`to produce
`said licensee unique ID.
`
`A321 [col. 15:21-col. 16:8].
`
`B.
`
`Microsoft's
`
`Study of Uniloc's Anti-Piracy Concept
`
`In 1993, Uniloc
`
`founder Richardson approached Microsoft
`
`in Australia to
`
`gauge its interest
`
`in his anti-piracy
`
`invention. A1431. Even though piracy was a
`
`huge problem for Microsoft at the time (A1435), Microsoft
`
`did not have its own
`
`anti-piracy
`
`technology
`
`(A1435-36;A2407).
`
`Accordingly, Microsofl's
`
`Australian
`
`office suggested to Microsofl's
`
`applications group in Redmond, Washington that it
`
`study Uniloc's
`
`anti-piracy
`
`system. A1435-36.
`
`Before disclosing Uniloc's
`
`technology, Richardson
`
`ensured that Microsoft
`
`executed
`
`a non-disclosure
`
`agreement
`
`("NDA"), which stated that Uniloc's
`
`anti-
`
`12
`
`Petitioner Ex. 1037 Page 22
`
`

`
`piracy
`
`concept was confidential
`
`and "the
`
`subject
`
`of a patent application."
`
`A4464;A1440-43.
`
`The NDA also forbade Microsoft
`
`from "attempt[ing]
`
`to reverse
`
`compile or reverse engineer any software provided to it." A4465.
`
`In addition,
`
`Uniloc's distributor, IBM, sent a letter to Microsoft "to confirm that Microsoft will
`
`only be conducting normal end user testing of the Uniloc
`
`code to determine its
`
`viability for use with Microsoft's products" and that "[t]his testing will not include
`
`any reverse engineering,
`
`decompiling or disassembly of the Uniloc code." A4980-
`
`81;A1580-82. Microsoft agreed.
`
`Id.
`
`Notwithstanding
`
`its promises not to reverse engineer or decompile Uniloc's
`
`software, Microsoft did exactly that. A Microsoft
`
`report indicated that Microsoft
`
`engineers
`
`had been "hacking
`
`around the debugger-crashing
`
`code" in Uniloc's
`
`software and using other techniques to identify Uniloc's
`
`software-code
`
`commands
`
`and determine how they worked. A4230-31;A1568-70;A2770-73.
`
`C.
`
`Microsoft Develops
`Uniloc's Software
`
`the Accused Technology After Studying
`
`Microsoft began its own '7_argeted" development
`
`of anti-piracy
`
`software in
`
`1995 (A2383;A2407)
`
`after it studied Uniloc's patent-pending
`
`software. The effort
`
`resulted
`
`in Product Activation.
`
`A2383;A2386-91.
`
`In his opening
`
`statement,
`
`Microsofl's
`
`counsel
`
`said that Product Activation was independently developed by
`
`Microsoft
`
`engineer Aiden Hughes. A1328. When Hughes testified, however, he
`
`admitted that he based his work on a specification prepared by David Pearce
`
`13
`
`Petitioner Ex. 1037 Page 23
`
`

`
`(A2061-63), who joined Microsoft's
`
`anti-piracy group in late 1995 with no anti-
`
`piracy experience
`
`(A2386;A2407).
`
`Pearce admitted that he investigated
`
`third-
`
`party solutions---including
`
`software
`
`sent
`
`to Microsoft
`
`for evaluatiow-while
`
`creating Product Activation's
`
`specification,
`
`and
`
`also that he
`
`lacked certain
`
`technological knowledge of the product he said he created (he did not know what
`
`algorithms were used in any Microsoft product), but he denied using Uniloc's
`
`technology.
`
`A2386-87;A2407-08;A2416-22.
`
`