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December 30, 2008 12:34 PM

Damages Control: Punitives Take Hit in Philly; Big Firm Lawyers Fight IP Awards in D.C.

Posted by Zach Lowe

Some important damages-related news today, courtesy of two Am Law Daily sibling publications. 

First, some evidence from the U.S. Court of Appeals for the Third Circuit that the U.S. Supreme Court's decision in July to limit punitive damages in the Exxon Valdez case has federal judges inching closer to the 1-1 damages ratio the defense bar has long sought.

According to Am Law Daily sibling publication Legal Intelligencer, a two-judge panel (the third recused herself) on Christmas Eve struck down an $8.2 million punitive damages ruling against a medical insurance company that refused to engage in reasonable settlement talks on behalf of a doctor facing a malpractice suit.

The court, citing two U.S. Supreme Court rulings (including the Exxon case), ruled that the award was excessive under a test the high court devised in a 2003 case. The judges went further, though, in concluding that the Supreme Court's general path points toward a 1-1 ratio between compensatory and punitive damages becoming a general guidepost. Good news for corporate defense lawyers. 

Meanwhile, as sibling publication the Recorder reports today, several Am Law 100 firms are involved in a high-profile fight to limit similar jury awards in IP infringement cases. In the case at issue before the U.S. Court of Appeals for the Federal Circuit, a federal district court jury ordered Microsoft to pay Lucent $500 million after finding that the calendar program in Microsoft's popular Outlook e-mail system contained a function that infringed on a Lucent patent. 

A team of Am Law 100 lawyers, led by Edward Reines at Weil, Gotshal & Manges and John Duffy of Fried, Frank, Harris, Shriver & Jacobson, has filed amicus briefs on Microsoft's behalf claiming that the award was too large and challenging one of the rules that courts and juries use to calculate infringement damages.

Under the so-called "entire market value rule," jurors can come up with a damages amount based on the market value of an entire infringing product -- in this case, Microsoft Outlook. The amicus team (representing such companies as Yahoo!, Intel and others) argues the rule is unfair, since only a fraction of Outlook subscribers actually use the calendar function Microsoft infringed upon. 

The rule has been "applied fairly loosely," said Robert Merges, a professor at the University of California at Berkeley School of Law who co-authored one of the briefs. 

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