Microsoft loses in patent lawsuit

Company used Alcatel-Lucent music technology without permission, federal jury decides

February 23, 2007|By Bloomberg News

SAN DIEGO -- Microsoft Corp. should pay Alcatel-Lucent $1.52 billion, a federal jury said yesterday, deciding that the world's biggest software maker used digital music technology without permission and handing down the largest patent ruling in history.

The jury said Microsoft infringed two Alcatel-Lucent patents with its Windows Media Player, including the version in the new Vista operating system. Microsoft pledged to challenge the verdict.

The decision allows Alcatel-Lucent, the world's biggest maker of communications equipment, to seek an order barring Microsoft from using the patented technology. Alcatel-Lucent's victory also may clear the way for legal actions against hundreds of companies that rely on MP3, the standard for playing music and sound files on a computer, mobile phone or digital-music player.

"Obviously we're very happy with the verdict," said Barbara Landmann, president of intellectual property and standards for Paris-based Alcatel-Lucent. "We fight hard to protect our intellectual property and are glad the jury agreed with our argument."

Microsoft shares rose 4 cents to close at $29.39 on the Nasdaq stock market. Alcatel-Lucent's American depositary receipts rose 7 cents to $13.14 on the New York Stock Exchange.

Microsoft said it licenses the technology from a German researcher, Fraunhofer Institute for Integrated Circuits IIS. Fraunhofer helped develop MP3 audio-compression technology with Bell Labs, once part of Lucent Technologies Inc., which Alcatel SA acquired last year.

"The damages award seems particularly outrageous when you consider we paid Fraunhofer only $16 million to license this technology," Microsoft Deputy General Counsel Tom Burt said in an e-mailed statement. "Today's outcome is therefore disappointing for us and for the hundreds of other companies who have licensed MP3 technology."

Microsoft said it will ask U.S. District Judge Rudi M. Brewster to overturn the verdict and will seek further review in an appeals court if necessary.

The jury was unable to decide whether the infringement was willful, so that count was dismissed. A ruling in Alcatel-Lucent's favor on that could have resulted in a tripling of the verdict.

Alcatel-Lucent will decide later whether to seek to block Microsoft from using the technology, said Alcatel-Lucent lawyer John Desmarais of Kirkland & Ellis in New York.

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