A federal district court judge delivered a major setback to Alcatel-Lucent on Monday by setting aside a jury’s $1.5 billion judgment against Microsoft in a patent infringement lawsuit over digital music technology.
The case centered on origins of the MP3 standard, a digital audio encoding format that was developed almost two decades ago.
The Windows Media Player software, part of Microsoft’s basic operating system software, plays audio files using the MP3 standard, the most common method of distributing music on the Internet.
The ruling could have an impact on Apple, the dominant maker of digital music hardware and software, as well as hundreds of other companies that use the standard.
Microsoft and others have licensed MP3 — not from Alcatel-Lucent, the recently merged telecommunications equipment company, but from a consortium led by the Fraunhofer Institute, a large German research organization that was involved, along with the French electronics company Thomson and Bell Labs, in the format’s development.
The current case turns on two patents that Alcatel-Lucent says were developed by Bell Laboratories, a forebear of Lucent, before it joined with Fraunhofer to develop MP3, the New York Times reports.
In 1996, AT&T spun off its Bell Labs unit, which became Lucent Technologies Inc. AT&T was later acquired by SBC Communications Inc., forming San Antonio, Texas-based AT&T Inc. Alcatel-Lucent was created last year through Alcatel SA's acquisition of Lucent.
The companies' patent battles began in 2002 when Lucent sued Dell Inc. and Gateway Inc. over technology related to color memory, video-search functions and controls using a computer stylus. Microsoft joined the case, fearing it might be obligated to reimburse Dell and Gateway for any damages. The computer makers use Microsoft's Windows operating system in their products.
Brewster separated the disputes into five groups based on the type of technology. The dispute over MP3 technology, used in Microsoft's Windows Media Player, is only between Microsoft and Alcatel-Lucent. The next trial, over video encoding patents, is scheduled for February.
Alcatel-Lucent shares fell 27 cents, or 3 percent, to 8.10 euros in Paris, after reaching a one-year low of 8.02 euros.
Shares of Microsoft rose 58 cents to $29.54 in Nasdaq Stock Market composite trading. The stock rose as high as $29.80 in after-hours trading.
The case is Lucent Technologies Inc. v. Gateway Inc., 02cv2060, U.S. District Court, Southern District of California (San Diego), Bloomberg reports.
Prepared by Alexander Timoshik