The United States District Court for the Southern District of New York ruled that U.S. Patent No. 6,295,075 (the ’075 patent), owned by ResQNet.com, Inc., is valid and is infringed by Lansa, Inc. The district court also ruled that ResQNet’s U.S. Patent No. 5,831,608 (the ’608 patent) is not infringed. The court awarded damages of $506,305 for past infringement based on a hypothetical royalty of 12.5%, plus prejudgment interest. The court denied ResQNet’s motion for a permanent injunction, and imposed a license, at a royalty of 12.5%, for future activity covered by the ’075 patent. The court assessed sanctions under Rule 11 against ResQNet and its counsel. We affirm the district court’s rulings on the issues of validity and infringement, and reverse the imposition of sanctions. On Lansa’s cross-appeal, we vacate the damages award and remand for redetermination of damages.