UNILOC USA, INC. and Uniloc Singapore Private Limited, Plaintiffs-Appellants,
v.
MICROSOFT CORPORATION, Defendant-Cross Appellant.

*1295 Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett and Dunner, LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Don O. Burley; Erik R. Puknys and Aaron J. Capron, of Palo Alto, CA. Of counsel on the brief were Paul J. Hayes and Dean G. Bostock, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC, of Boston, MA.

Frank E. Scherkenbach, Fish and Richardson P.C., of Boston, MA, argued for defendant-cross appellant. With him on the brief were Kurt L. Glitzenstein; John W. Thornburgh, of San Diego, CA and Laura R. Braden, of Washington, DC.

Before RADER, Chief Judge, LINN and MOORE, Circuit Judges.

LINN, Circuit Judge.

Uniloc USA, Inc. and Uniloc Singapore Private Limited (collectively, "Uniloc") appeal from the decision of the United States District Court for the District of Rhode Island granting Microsoft Corporation's ("Microsoft") motion for judgment as a matter of law ("JMOL") of non-infringement and no willful infringement of asserted claims of Uniloc's U.S. Patent No. 5,490,216 ("'216 patent"), and, in the alternative, granting a new trial on infringement and willfulness. Uniloc USA, Inc. v. Microsoft Corp., 640 F.Supp.2d 150 (D.R.I. Sept.29, 2009) ("Uniloc II"). Uniloc also appeals the district court's alternative grant of a new trial on damages. Microsoft cross-appeals the district court's denial of its motion for JMOL of invalidity of the '216 patent. Id. at 179-83.

Because the jury's verdict on infringement was supported by substantial evidence, this court reverses the district court's grant of JMOL of non-infringement; this court also reverses the district court's alternative grant of a new trial on infringement as an abuse of discretion. Because the jury's verdict on willfulness was not supported by substantial evidence, this court affirms the district court's grant of JMOL of no willfulness; the district court's alternative grant of a new trial for willfulness is thus rendered moot. Because the jury's damages award was fundamentally tainted by the use of a legally inadequate methodology, this court affirms the grant of a new trial on damages. Finally, because the district court did not abuse its discretion in determining that the jury verdict of no invalidity of the '216 *1296 patent was supported by substantial evidence, we affirm the district court's denial of Microsoft's motion for JMOL of invalidity.

I. BACKGROUND

Commercial software manufacturers like Microsoft lose significant sales as a result of the "casual copying" of software, where users install copies of a software program on multiple computers in violation of applicable software license conditions. Uniloc's '216 patent was an early attempt to combat such software piracy. There is no dispute as to the actual functioning of Uniloc's patented invention and Microsoft's accused products. The following background information is taken from the district court's opinion. Uniloc II, 640 F.Supp.2d 150.

A. The '216 Patent

Uniloc's '216 patent is directed to a software registration system to deter copying of software. The system allows the software to run without restrictions (in "use mode") only if the system determines that the software installation is legitimate. A representative embodiment functions as follows. First, a user intending to use the software in "use mode" enters certain user information when prompted, which may include a software serial number and/or name and address information. An algorithm on the user's computer (a "local licensee unique ID generating means") combines the inputted information into "a registration number unique to an intending licensee" (a "local licensee unique ID"). '216 patent, Abstract. The user information is also