Microsoft wins reversal of MP3 patent decision

Microsoft, pending appeals, will no longer have to pay Alcatel-Lucent $1.5 billion after a judge ruled it had a valid license for a patent related to MP3 technology.

Microsoft has won a reversal of a $1.5 billion jury verdict against it for infringing on a patent for MP3 technology held by Alcatel-Lucent.

Judge Rudi Brewster of the U.S. District Court for the Southern District of California tossed out the damages after finding that a jury improperly ruled that Microsoft infringed on one of two patents at issue for MP3 sound technology. The new ruling holds that one of the patents in the case was not actually owned outright by Lucent, and since Microsoft had a license to that particular patent through its co-owner, it's off the hook.

There were two patents at issue in the case over the technology used in MP3 files. One of those patents, the judge ruled Friday, was actually co-owned by AT&T, Lucent's former parent company, and a German company called Fraunhofer, with which Microsoft had a licensing agreement to use the patented technology. This is the opposite of what a jury concluded in February, but Judge Brewster ruled that some of the technology in the patent was developed after Fraunhofer and AT&T signed a joint-development agreement in 1989.

That would give Fraunhofer co-ownership rights to the patent (known as the '080 patent), and the right to license it to Microsoft. Furthermore, it doesn't allow Lucent-Alcatel to sue Microsoft for infringement because Fraunhofer wasn't included in the original suit, the judge ruled.

So, bottom line: Microsoft won't have to pay Lucent-Alcatel $1.5 billion--at least not yet--there could be more appeals in this case. That's a drop in the bucket to Microsoft, but Lucent-Alcatel, which is losing money, probably could have used the cash.

Microsoft was pleased with the ruling, as you might expect. "Today's ruling by the judge reversing the jury's $1.52 billion verdict against Microsoft is 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 embodied in the '080 patent from its co-owner and industry recognized MP3 licensor--Fraunhofer," the company said in a statement.

Lucent, not so much. "The reversal of the judge's own pre-trial and post-trial rulings is shocking and disturbing,'' Alcatel-Lucent spokeswoman Mary Ward told Bloomberg. "The jury unanimously agreed with us. We believe their decision should stand."