Stephen S. Wu-- SL: Legal Writer,, (408) 573-5737, 50 W. San Fernando St., Ste. 750, San Jose, CA 95113

Are Patent Damages as Fictional as Second Life?

A recent federal court decision in Rhode Island mentioned Second Life, but not in the context of adjudicating a virtual worlds intellectual property dispute. Instead, the court compared a reasonable royalty calculation of patent damages to Second Life® virtual world, saying that they both are “make believe.” Uniloc USA, Inc. v. Microsoft Corp., 632 F. Supp. 2d 147, 150 (D.R.I. 2009).
Uniloc USA, Inc. and Uniloc Singapore Limited (“Uniloc”) sued Microsoft for patent infringement, contending that Microsoft’s anti-piracy technology for product activation in Windows, Office, and other software violated Uniloc’s patent. As the case approached trial, the parties filed “motions in limine” -- pretrial motions asking the court to exclude the other side’s evidence. In this case, each of the parties sought to exclude the testimony of the other side’s expert on damages.

The court plays a gatekeeping function under
Daubert v. Merrell Dow Pharmacuticals, Inc., 509 U.S. 579 (1993). The judge must determine whether expert testimony is reliable enough for submission to the jury for its deliberations. In the words of the court, “experts may only provide opinion testimony of it is based on sufficient facts or data, is the product of reliable principles and methods, and the witness applies those principles reliably to the facts.” Uniloc, 632 F. Supp. 2d at 150 (citing Daubert, 509 U.S. at 592-93).

The court then compared the kinds of royalty analysis established by Uniloc’s expert to Second Life, essentially saying they are both “make believe.” The court stated:

“This motion (and Uniloc's companion motion, discussed below) test the limits of tolerance of Rule 702 and Daubert. This is so because the world of damage calculation in a patent case is constructed on a fictional foundation that resembles the make believe world of "Second Life." If a jury finds Microsoft has infringed Uniloc's patent, it will be called upon to determine what a reasonable royalty would be. It will be asked to do this by envisioning a fictional or "hypothetical" negotiation wherein these two parties -- or rather their perfectly reasonable avatars -- are transported back in time to negotiate a royalty. “

Uniloc, 632 F. Supp. 2d at 150 (emphasis added).

The court apparently obtained its impression of Second Life by viewing the Wikipedia entry on the virtual world.
Id. at 150 n.1 (citing Wikepedia article as describing the Second Life virtual world accessible via the Internet).

My thought on the decision is that it is largely innocuous, but by considering Second Life as entirely “make believe,” the judge is perhaps missing the potential of Second Life as a source of real experiences. And that is a little disappointing. Second Life is not simply a game, but a place where people can communicate without the barriers of travel, expense, and in some cases physical disability. It is unfortunate that the judge didn’t take Second Life more seriously. Nonetheless, this decision may not be remembered and may be relegated to a footnote in history. In any case, I doubt the case will have much of an impact on Second Life hosting company Linden Research’s business prospects.