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Attorneys for Microsoft Corporation - page 55 / 74





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used in calculating the $200-$207 million damages estimate.

Specifically, Wagner

concluded that factors 3, 5, 6, 9, and 11 affected the baseline rate.

Wagner opined that factor 3, which considers the license’s terms, lowered the

royalty rate because his hypothetical license did not give Microsoft know-how, additional

cooperation or trade secrets, just non-exclusive use in the United States. However,

Wagner opined that factors 5, 6, 9, and 11 increased the royalty rate. For factor 5,

which looks at the commercial relationship between the licensor and licensee, Wagner

found that Microsoft was a direct competitor of i4i, which meant any license would

destroy a “very large segment” of i4i’s market. For factor 6, which asks whether the

patented technology promotes the sale of other products, Wagner concluded that the

infringing custom XML editor was critical to Microsoft’s sales generally, as evidenced by

internal Microsoft statements that a custom XML editor was “one of the most important

ways” for encouraging users to purchase new Word products. Examining factor 9,

which examines the infringer’s need for taking a license, Wagner opined that Microsoft

had no commercially acceptable, non-infringing alternatives to using i4i’s patent. This

opinion was based on internal Microsoft documents describing Microsoft’s interest in

creating such a custom XML editor, and prolonged inability to do so. For factor 11,

which looks at the use and value of the patented technology to Microsoft, Wagner

concluded that the custom XML editor was a critical addition to Word. In support of this

view, i4i presented statements by Microsoft employees that custom XML was not a

“slight addition [but i]t’s more like 90 percent of the value,” was “where the future is,

seriously,” and “the glue that holds the Office ecosystem together.” Based on all of



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