The Federal Circuit’s January 4, 2011, ruling in Uniloc USA Inc. v. Microsoft Corp.1 is a significant decision regarding damages recovery in patent infringement claims. The Uniloc holding abolished the “25 percent rule”—a methodology sometimes used to calculate reasonable royalty for infringement damages—as a “fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.”2 And, in keeping with the recent trend of denying overly broad applications of the “entire value market rule,” the Federal Circuit rejected the methodology used by Uniloc’s expert because the patented invention did not drive consumer demand for the accused products.3

In short, Uniloc v. Microsoft signals that to prevail on a damages claim, the patentee must carefully lay a factual foundation that establishes the relevance of any analytical tool used by the patentee’s expert to the facts of the case—the patents in suit, the products, and the parties.