Microsoft Told To Pay Alcatel-Lucent $1.52 Billion

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

The San Diego jury said today that 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 digitalmusic player.

The damage award, which represents about six weeks of free cash flow for Redmond, Washington-based Microsoft, may be halved if the software maker wins an unrelated case currently before the Supreme Court that could alter how patent damages are calculated for software companies with overseas sales. Arguments in that case were held yesterday in Washington.

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.”


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