Summary:

It would have been one of the largest patent awards ever, and it would have gone to a controversial kind of plaintiff-a company that has no…

It would have been one of the largest patent awards ever, and it would have gone to a controversial kind of plaintiff-a company that has no business other than a patent lawsuit. But whatever get-rich-quick dreams of patent riches the owners of Mirror Worlds LLC had, they just got knocked down. An East Texas jury awarded the company $625 million last year after its trial against Apple (NSDQ: AAPL), but a judge threw that verdict out yesterday, ruling the jury’s opinion simply didn’t have the necessary “foundational support” to find Apple liable for patent infringement.

The three patents in this lawsuit were created by David Gelernter, a Yale computer science professor, and his then-graduate student Eric Freeman. Gelernter founded a company called Mirror Worlds Technologies, but it failed and shut down in 2004. Four years later, Gelernter lawyered up and said that Apple’s Spotlight, Cover Flow, and Time (NYSE: TWX) Machine features all have a way of displaying documents that he invented and patented. Forming a shell company called Mirror Worlds LLC, he sued Apple in the Eastern District of Texas, a venue perceived as favorable to patent-holders. A trial took place last year, and in October a jury gave Mirror Worlds $625.5 million, or $208.5 million for each of the three patents it found infringed.

While courts aren’t supposed to work like this, I can’t help but wonder if what happened here is that Mirror Worlds actually won too big. Judges in East Texas are aware that their district is perceived as a haven for patent trolls, and a $625 million verdict against one of the nation’s most prominent companies quickly gets the attention of the national press. (See the NYT’s story published shortly after the verdict.) If this giant verdict had held up, it would have been one of the largest ever in patent law-and the money would have gone to a do-nothing shell company and the law firms that assisted it. There’s no question it would have contributed to more negative headlines questioning whether the patent system is functioning properly, and highlighting the role of East Texas in particular.

But judging from the ruling, it also looks like the plaintiff’s overreach on the damages front bothered the judge who oversaw the case, U.S. District Judge Leonard Davis, a judge with a great deal of experience in patent cases. Davis took particular issue with the damages expert hired by Mirror Worlds. That expert, Walter Bratic, suggested that Apple should be forced to pay a royalty of 8.81% on its software (Mac OS X 10.4, 10.5, and 10.6 were all said to be infringing these patents) and 0.81% on the computers that used the accused features.

»  Judge Davis Order Overturning Verdict [PDF]

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