A US appeals court has restored a jury verdict in a multimillion-dollar patent infringement case against Microsoft but ordered a new trial on damages.

The US Court of Appeals for the Federal Circuit, in an opinion released Tuesday, reversed a district court ruling in favour of Microsoft in a case brought by Uniloc Singapore, the maker of antipiracy software.

The jury's decision finding that Microsoft had infringed Uniloc's patent was "supported by substantial evidence," wrote Judge Richard Linn, for a three-judge panel.

However, the jury award of $388 million was "fundamentally tainted by the use of a legally inadequate methodology," Linn wrote in ordering a new trial on damages.

Microsoft, however, cheered the appeals court ruling. The appeals court put limits on the amount of damages that can be awarded based on product revenues, said David Howard, corporate vice president and deputy general counsel for Microsoft.

The appeals court ruling "may signal the end of unreasonable and outsized damages awards based on faulty methodology," Howard said in a statement. "We look forward to the new trial."

The jury from the US District Court for the District of Rhode Island ruled in April 2009 that Microsoft's product activation system infringed on a patent held by Uniloc. District court Judge William Smith threw out the jury award in September 2009.

This is the second time the appeals court has sent the case, originally filed in September 2003, back to the Rhode Island court. Smith threw out the case in 2006, but the same appeals court sent the case back for re-trial in August 2008.