A San Diego judge overturned Monday a record-breaking $1.52 billion patent-infringement judgment against Microsoft. The decision reverses a jury determination that Microsoft infringed on Alcatel-Lucent's MP3 patents.
U.S. District Court Judge Rudi M. Brewster ruled that, of the two patents in question, Microsoft properly obtained a license to use the technology covered by one patent and that there was no proof of infringement on the second patent.
"The court finds that the jury's verdict was against the clear weight of the evidence," Brewster wrote in his 43-page decision.
Microsoft and scores of other technology companies license the MP3 player technology from the Fraunhofer Institute for Integrated Circuits. The German research institute helped develop the MP3 audio compression technology along with Bell Labs, once a part of Lucent Technologies, which, in turn, later merged with the French networking powerhouse Alcatel.
Brewster ruled Fraunhofer and Lucent-Alcatel jointly own the licensing rights to the MP3 compression technology and since Fraunhofer was not a party to the suit, Microsoft was not liable for infringement. Microsoft paid Fraunhofer $16 million for the licensing rights.
Brad Smith, Microsoft's general counsel, called the decision a "victory for consumers of digital music and a triumph for common sense in the patent system. For the hundreds of companies large and small that rely on MP3 technology, the court's ruling clarifies that these companies have properly licensed the technology."
Among the many companies with MP3 licensing deals with Fraunhofer are Adobe , Autodesk, Apple, Cisco, HP and Sun.
Alcatel-Lucent spokesman Mary Ward called the decision "shocking and disturbing" and said the company would appeal the decision to the U.S. Circuit Court of Appeals in Washington.
"After a three-week trial and four days of careful deliberation, the jury unanimously agreed with us, and we believe their decision should stand," Ward said in a statement. "We still have a strong case and we believe we will prevail on appeal."
According to Microsoft, if Lucent-Alcatel prevails at the appeal level, the case would have to be re-tried, as opposed to the verdict being reinstated.
The case began in 2002 when Lucent sued computer makers Gateway and Dell over their use of MP3 technologies, including the ones in Windows Media Player. Microsoft joined the case because it would be obligated to reimburse Dell and Gateway for any damages they might have to pay. By the time it went to trial, the case was between Microsoft and Alcatel-Lucent.
The jury's infringement award included foreign sales of Windows using MP3 technology. Two months after the decision, though, the Supreme Court ruled that U.S. patent law does not apply overseas.
In that case, the justices reversed a lower court decision that extended damages to overseas sales of Windows in the aftermath of a successful AT&T infringement lawsuit against Microsoft. AT&T and Microsoft reached an undisclosed settlement for U.S. copies of Windows containing speech compression technology.