CAFC Rules in Uniloc v. Microsoft

A decision from the Federal Circuit this week in Uniloc USA, Inc. v. Microsoft Corp. sounds the death knell for the “25 percent rule” and allows Microsoft to dodge a $388 million jury verdict. For over a decade, the rule has been widely used as a tool to approximate the reasonable royalty a manufacturer would be willing to offer a patentee for the use of his patented invention. Under this rule, a patentee could recover 25 percent of the profits earned by a manufacturer through its sale of an infringing product. In its unanimous decision on January 4th, the Federal Circuit once and for all declared that the 25 percent rule “is a fundamentally flawed tool for determining a baseline royalty rate.” The Court reasoned that the rule is not based on the underlying facts of any given case and is therefore “arbitrary, unreliable, and irrelevant.”