Kaufman v. Microsoft Corporation

Background

Michael Philip Kaufman, whom the opinion identifies as the holder of U.S. Patent No. 7,885,981, sued Microsoft Corporation for direct infringement, induced infringement, contributory infringement, and willful infringement. The patent concerns an invention for interacting with relational databases.

The motion concerned expert testimony about damages. Under 35 U.S.C. § 284, damages in a patent-infringement action must adequately compensate the claimant and may not be less than a reasonable royalty. Both sides retained experts to address the reasonable-royalty calculation.

Microsoft submitted the rebuttal report of Dr. Jeffrey A. Stec. Stec opined, among other things, that Microsoft would have paid Kaufman no more than $230,000 in a hypothetical negotiation for a license when the patent issued. Stec relied in part on a settlement agreement from litigation brought against Microsoft by Advanced Dynamic Interfaces, LLC. In that earlier litigation, Advanced Dynamic Interfaces alleged infringement of patents involving technology that Stec considered similar to the technology at issue here. The settlement required Microsoft to pay $230,000 to obtain a release from liability and a license to use the other party’s intellectual property.

Motion and Arguments

Stec considered the earlier settlement in connection with Factors 2 and 15 of the framework from Georgia-Pacific Corp. v. U.S. Plywood Corp. Factor 2 concerns rates paid for comparable patents, and Factor 15 concerns the amount the parties would have agreed on in a voluntary license negotiation when infringement began.

The opinion says that Kaufman moved to exclude Stec’s testimony to the extent it relied on the earlier settlement. Kaufman argued that Stec failed to account for the litigation posture of the earlier dispute and how that posture might have affected the settlement amount and the comparability of the license. The opinion states that Kaufman did not challenge Stec’s alternative analyses, which used different methods and produced different royalty ranges.

Court’s Analysis

The court acknowledged that Stec expressly discussed technological similarities and certain economic and business considerations supporting comparability, but did not directly discuss how the earlier litigation’s posture affected the settlement amount or comparability.

The court nevertheless declined to exclude the testimony. It distinguished cases in which experts had ignored the litigation-settlement context along with other problems, such as failing to consider more comparable licenses or failing to assess technological comparability. In this case, the court found that Stec sufficiently explained why the most reliable license in the record arose from litigation and was a permissible point of comparison. The court held that Kaufman’s challenges to the comparability of the earlier license were more appropriately addressed through cross-examination.

Disposition

The court denied the motion to exclude expert testimony and directed the Clerk to terminate the open motion, identified as ECF No. 118. The opinion’s opening states that the plaintiff filed the motion, while its conclusion refers to it as the defendant’s motion; the text does not explain this inconsistency. Judge Alvin K. Hellerstein signed the order.