In a re-issuance of an earlier opinion, the U.S. Court of Appeals for the Federal Circuit clarified the willfulness analysis of its earlier decision that affirmed a jury’s $200 million award against Microsoft in a patent infringement action. i4i Ltd. v. Microsoft Corp., Case No. 09-1504, 589 F.3d 1246 (Fed. Cir., Dec. 22, 2009), amended by 2010 U.S. App. LEXIS 5010 (Fed. Cir., Mar. 10, 2010) (Prost, J.).

This case and Microsoft’s petition for rehearing en banc, coming on the heels of the Federal Circuit’s Lucent and ResQNet.com cases in which the Court recently reined in damages awards, have been closely watched. However, Microsoft’s petition for en banc rehearing was denied.

Both i4i panel opinions and comments from the panel during oral argument indicate that the Court’s decision to affirm the large damage award may have been different if it felt free to undertake the more liberal substantial evidence review, which was disallowed because Microsoft failed to file a pre-verdict motion for judgment as a matter of law (JMOL) on the damages issue. Thus, in the reissued opinion, the Court did not change its analysis of the jury’s reasonable royalty rate of $98-per-sale of Microsoft Word, a finding favorable to i4i.

Rather than treble the $200 million damages award, the district court awarded only $40 million in enhanced damages upon the jury’s finding of willful infringement. On appeal, Microsoft challenged the willfulness verdict as unreasonable. In the reissued opinion, the Court explained in more detail the circumstantial evidence i4i presented at trial to prove each prong of the Seagate willfulness standard. Under that test, i4i had to present clear evidence that Microsoft “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” i4i also had to show that Microsoft knew or should have known it was risking infringement.

As the Court explained in the reissued opinion, i4i presented sufficient evidence at trial to prove to a reasonable juror that Microsoft was aware of the patent because its employees attended demonstrations of i4i’s software that practiced the patent. Employees also received i4i’s sales kits that touted the technology as both “patented” and cited the associated patent number. Also, i4i placed into evidence a series of internal Microsoft email chains—one of which noted that the “heart” of i4i’s software was patented. Despite that awareness, Microsoft did not attempt to design around the patent and continued development of its own similar software application. Thus, based on the evidence at trial, the Court determined that a reasonable juror could infer that Microsoft preceded despite an objectively high likelihood that it was infringing i4i’s patent.