Microsoft, Abbott, Serious Bidness: Intellectual Property

Microsoft Corp., the world’s biggest software maker, infringed a patent on technology used to deter piracy, an appeals court ruled in a decision that may change how damages are calculated in future cases.

The ruling by the U.S. Court of Appeals for the Federal Circuit in Washington yesterday upholds the validity of a patent owned by Uniloc USA Inc. and Uniloc Singapore Private Ltd., while ordering a new trial to reassess the damages Microsoft should pay.

“It’s a strong validation of the value of the patent,” Brad Davis, chief executive officer of Irvine, California-based Uniloc USA, said in a telephone interview. “The damages issue is what it is, and we’ll live with it. We have a sense of how much we contributed to Microsoft’s bottom line.”

The ruling throws out a common tool used to calculate infringement awards, and will likely reduce the amount Redmond, Washington-based Microsoft will have to pay closely held Uniloc. The Federal Circuit called for a new trial on damages, saying a 2009 lower-court verdict of $388 million was “fundamentally tainted by the use of a legally inadequate methodology.”

“This is an important and helpful opinion with respect to the law of damages, and it may signal the end of unreasonable and outsized damages awards based on faulty methodology,” David Howard, deputy general counsel for Microsoft, said in an e- mailed statement. “We look forward to the new trial.”

U.S. District Judge William Smith in Providence, Rhode Island, had thrown out the 2009 verdict Uniloc won. The company was appealing Smith’s decision, while Microsoft was seeking a court ruling that would limit the ability of patent owners to seek big damage awards from large technology companies.

Uniloc’s lawsuit, filed in October 2003, targeted Microsoft’s Windows XP operating system and some Office programs. Microsoft argued that it used a different method for registering software and that the patent was invalid.

The Federal Circuit’s decision to uphold the validity of the patent may boost Uniloc’s efforts to collect royalties from additional companies including Symantec Corp. and Adobe Systems Inc. Uniloc Singapore owns the patent and Uniloc USA is the exclusive licensee, Davis said.

Lawyers for Uniloc showed jurors during the 2009 trial a pie chart with $19 billion in revenue from the Windows XP operating system and some versions of Word. Uniloc was seeking 2.9 percent of that total, or about $564 million. The jury awarded $388 million.

Smith ruled that, even if the Federal Circuit decided the jury verdict on infringement was appropriate, Microsoft would be entitled to a new trial on the damages because Uniloc shouldn’t have been able to use the $19 billion figure in front of jurors.

The Federal Circuit said courts shouldn’t allow damages to be based on a common calculation that has as a starting point the “rule of thumb” that 25 percent of a product’s value goes to the patent owner.

That method “fails to tie a reasonable royalty base to the facts of the case at issue,” the Federal Circuit ruled.

The case is Uniloc USA v. Microsoft Corp., 10-1035, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Uniloc USA Inc. v. Microsoft Corp., 03cv440, U.S. District Court, District of Rhode Island (Providence).

India Rejects Patent Application for Abbott’s Kaletra

Abbott Laboratories was refused patent protection on its AIDS drug Kaletra by India’s patent office, allowing Cipla Ltd. and other generic-drug companies to continue selling copies.

Steps involved in making Kaletra “do not constitute an invention,” the agency’s Mumbai office said in documents dated Dec. 30. The patent application by Abbott Park, Illinois-based Abbott was challenged by the Initiative for Medicines, Access & Knowledge, as well as Cipla and Matrix.

Abbott is reviewing the patent decision and determining its next steps, spokesman Scott Stoffel said yesterday. Newer versions of the drug don’t require refrigeration and needn’t be taken with food, making them better suited for patients in developing countries, he said.

Kaletra, a combination of two antivirals, is in the class of drugs known as protease inhibitors, which block viral replication by inhibiting an enzyme essential for reproduction of the virus.

It’s a preferred second-line treatments to fight drug- resistant AIDS, according to the World Health Organization, which recommends governments include it on their list of essential treatments for the disease caused by the human immune deficiency virus.

The product generated about $1.37 billion in sales in 2009, making it Abbott’s second-best seller after the arthritis drug Humira.

The patent application is 339/MUMNP/2006.

For more patent news, click here.

Trademark

Website Operator Issues Challenge to ‘Hon’ Trademark Owner

A Baltimore restaurateur’s registration of “hon” as a trademark faces a challenge from the operator of the “Welcome to Baltimore, Hon!” website.

Bruce Goldfarb posted the “Hon Manifesto” on his site, taking exception to Denise Whiting’s registration of the term for use with her Cafe Hon and annual Honfest celebration of all things Baltimorean.

In December, Baltimoreans became aware that White had registered the mark and said publicly that she would enforce it. “Hon” is a term of endearment frequently used in Baltimore.

In his manifesto, Goldfarb said Whiting’s claim to exclusive commercial rights to the term “unreasonably inhibits speech and restrains business.”

The “near universal surprise to the news” that Whiting had registered “hon” as a trademark “speaks loudly to the absence of lineage between the word and Whiting or any of her business interests,” Goldfarb wrote. “Hon has zero brand identity.”

He said he plans to set up an online shop to sell t-shirts, mugs, stickers and other Baltimore-related items in connection with his “Welcome to Baltimore, Hon!” website and invited Whiting to try to enforce the trademark against him.

Whiting didn’t immediately respond to an e-mail seeking comment. She had no comment on Goldfarb’s challenge, the Baltimore Sun reported.

For more trademark news, click here.

Copyright

Chicago Alderman Candidate Sued for Copyright Infringement

A Chicago photographer sued a political candidate for copyright infringement.

Proco Moreno is running for re-election as alderman for Chicago’s First Ward. Photographer Mark Joseph Whaley is suing over the unauthorized use of his photo of Moreno’s opponent, Deborah Lopez, in what the complaint refers to as the “Moreno Negative Flyer.”

The flyer was distributed the day before the deadline for filing petitions with the Chicago Election Board and alleged unethical conduct by Lopez related to her job with the Chicago Transit Authority, according to court papers.

Lopez received an exoneration letter from the transit authority on Dec. 23, according to the complaint.

Whaley -- who uses the pseudonym Mark Joseph --accused Moreno of being behind the negative flyer, saying the candidate “at all relevant times stood to benefit directly and to the greatest extent from the creation and distribution.”

Use of the photo without Whaley’s consent caused the photographer “irreparable damage,” he said in his pleadings. He asked the court to bar further use of the photo, and for awards of money damages and any profits Moreno derived from his alleged acts of infringement, in addition to attorney fees and litigation costs.

The Moreno campaign didn’t immediately return an emailed request for comment.

Whaley is represented by William F. Zieske of Zieske Law of Chicago.

The case is Mark Joseph Whaley v. Proco Moreno, 1:11-cv- 00024, U.S. District Court, Northern District of Illinois (Chicago).

Adult-Film Maker Sues 109 Defendants for Infringement

Serious Bidness LLC, a Las Vegas-based maker of adult films, sued 109 unidentified defendants for copyright infringement.

According to the complaint filed Jan. 2 in Dallas, the defendants infringed the copyright for Serious Bidness’s film “Kayla Kleevage” by downloading and sharing the content through the use of BitTorrent technology.

The distribution of even one single unauthorized digital copy of the film “can result in worldwide distribution of that single copy to a limitless number of people in a matter of hours,” Serious Bidness said in its court papers.

In December, a federal judge in West Virginia told Axel Braun Productions it had to sue defendants one-by-one in a case alleging infringing of its “Batman XXX: A Porn Parody.” Braun sued more than 7,000 unidentified defendants in that court in October.

Serious Bidness asked the court for orders barring future infringement of the copyrights of “Kayla Kleevage” and any of its other films, together with awards of money damages, attorney fees and litigation costs.

The case is Serious Bidness LLC v. Does 1-109, 3:11-cv- 00002-K, U.S. District Court, Northern District of Texas (Dallas). The earlier case brought by Axel Braun is Axel Braun Productions v. Does 1-7098, 3:10-cv-00112-JPB, U.S. District Court, Northern District of West Virginia (Martinsburg).

For more copyright news, click here.

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.