## Facts

- Lucent Technologies and related entities asserted U.S. Patent No. 4,763,356 (the “Day patent”) against multiple defendants, including Microsoft, in the Southern District of California.
- The Day patent covered a method of entering information into on-screen fields using predefined, non-keyboard tools (e.g., menu- or picker-based input).
- Microsoft’s accused products included Microsoft Outlook, Microsoft Money, and Windows Mobile; Lucent pursued indirect infringement based on customers’ use of the software.
- A jury found Microsoft indirectly infringed claims 19 and 21 and found the asserted claims not invalid.
- The jury awarded Lucent $357,693,056.18 as a lump-sum reasonable royalty for the Day patent.
- The district court denied Microsoft’s post-trial motions challenging infringement, validity, and the Day-patent damages verdict.
- Microsoft appealed liability (infringement and validity) and damages; Lucent cross-appealed on other issues not central to the damages ruling.

## Issues

1. Whether substantial evidence supported the jury’s finding that Microsoft indirectly infringed the asserted claims of the Day patent.
2. Whether Microsoft proved the asserted claims invalid for anticipation or obviousness.
3. Whether substantial evidence supported the $357.7 million lump-sum reasonable-royalty award, including whether the royalty base and methodology improperly relied on entire-product revenues for multi-feature software.

## Decision

- The Federal Circuit affirmed the judgment that the Day patent claims were not invalid.
- The Federal Circuit affirmed the jury’s finding of Microsoft’s indirect infringement, concluding the record supported customer direct infringement and Microsoft’s knowledge and encouragement.
- The Federal Circuit vacated the $357,693,056.18 damages award as unsupported by substantial evidence.
- The case was remanded for a new trial limited to damages for the Day patent.

## Legal Principles

- Reasonable-royalty damages must be supported by reliable, non-speculative evidence tied to the value contributed by the patented invention.
- Prior license agreements used in a hypothetical-negotiation analysis must be sufficiently comparable in technological scope and economic circumstances to inform the royalty outcome.
- The entire market value rule is improper unless the patentee proves the patented feature drives demand for the overall product; otherwise, the royalty analysis must avoid capturing value attributable to unpatented features.
- Expert damages opinions must connect the proposed royalty to the incremental value of the patented feature and cannot rest on generalized aggregates or untethered rules of thumb.
- Courts may set aside a jury’s damages verdict where the evidentiary foundation does not support the specific amount awarded.

## Conclusion

The Federal Circuit upheld Microsoft’s liability for indirect infringement and confirmed the Day patent’s validity, but rejected the jury’s $357.7 million lump-sum royalty as inadequately supported, requiring a new damages trial grounded in evidence that isolates the patented feature’s value and satisfies strict limits on using entire-product revenues.


Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009)