RTTNews) - Thursday, software giant Microsoft Corp. (MSFT) was ordered to pay $1.52 billion in damages after a federal jury in San Diego ruled that the company infringed audio patents held by France-based communications solutions provider Alcatel-Lucent (ALU). The patents relate to the conversion of audio files into the digital MP3 file format on personal computers. Alcatel Lucent had accused Microsoft of infringement of patents related to standards used for playing digital music files. Microsoft said that it plans to seek relief on the verdict from the trial court. It said the verdict is completely unsupported by the law or facts, and added that it may appeal, if necessary.
In 2003, Alcatel-Lucent, then known as Lucent, filed fifteen patent claims against Microsoft's customers and PC makers, Gateway Inc. (GTW) and Dell Inc. (DELL) over the use of color memory, video search functions and the use of a stylus to control a computer using Microsoft's Windows Media Player. However, these companies were replaced by Redmond, Washington-based Microsoft, who got involved on account of its indemnity agreement with its partners and as the patent was closely tied to its Windows operating system.
Microsoft revealed that it intends to seek relief from the trial judge and added that it would file an appeal, if necessary. The company said that it licensed the technology from Germany-based Fraunhofer Institute for $16 million.
Microsoft said that the judgment amount was based on worldwide sales of the company's Windows operating system since May 2003. The company was of the opinion that many other companies use the MP3 technology in question and a decision against the company would put all the others in legal trouble.
In a statement, Tom Burt, corporate vice president and deputy general counsel, Microsoft said, "Like hundreds of other companies large and small, we believe that we properly licensed MP3 technology from its industry recognized licensor - Fraunhofer. The damages award seems particularly outrageous when you consider we paid Fraunhofer only $16 million to license this technology. Therefore, today's outcome is disappointing for us and for the hundreds of other companies who have licensed MP3 technology. We are concerned that this decision opens the door for Alcatel-Lucent to pursue action against hundreds of other companies who purchased the rights to use MP3 technology from Fraunhofer, the industry-recognized rightful licensor." Fraunhofer Institute originally developed the MP3 technology in question together with Bell Labs, which eventually became Lucent Technologies. Alcatel agreed to acquire Lucent for $13.5 billion in stock last year.
The verdict, which is only for one of the six patent lawsuits currently underway by Alcatel-Lucent, may lead to more settlements with other technology companies, given the widespread use of MP3s on portable music players and computers.
The judge reportedly threw out two of the patent claims and scheduled six separate trials to consider the remaining disputes.
Microsoft and Alcatel are locked in a number of patent disputes, including a suit over the video-decoding technology in Microsoft's Xbox 360 video game console. Lucent filed a suit against Microsoft in April last year, while Microsoft filed a countersuit a month later, seeking to dismiss the claims. Other lawsuits directed at Microsoft cover speech pattern technology, user interface patents and video technology.
Last week, Microsoft accused Alcatel-Lucent of violating four patents related to the computer and phone systems that monitor and run calls, messages and video communications. Microsoft alleged that Alcatel was already selling products that used the technology.
In addition to the lawsuit against Alcatel-Lucent, Microsoft is also involved in legal wrangles with other companies. In a case against AT&T, the U.S. Supreme Court will examine whether Microsoft is liable for patent infringement costs after distributing a speech-coding technology patented by AT&T on overseas copies of the Windows operating system.
MSFT closed Thursday's regular trading session at $29.39, up $0.04 or 0.14% on a volume of 57.75 million shares. In the 52-week period, the stock has been trading in a range of $21.46-$31.48.
ALU closed Thursday's regular trading session at $13.14, up $0.07 or 0.54% on a volume of 15.89 million shares. In the 52-week period, the stock has been trading in a range of $10.63-$16.51.
