Alcatel-Lucent Wins $1.52 Billion Patent Judgment Against Microsoft

Includes: MSFT, NOK
by: Judith Levy

A California jury has ruled that Microsoft must pay Alcatel-Lucent $1.52 billion for infringing two MP3 audio compression patents. Microsoft will appeal the verdict. Microsoft uses MP3 software in its Windows Media Player. The software was co-designed by Bell Labs, Lucent's predecessor, and the Fraunhofer Institute for Integrated Circuits. Microsoft paid Fraunhofer $16 million for the technology, but Alcatel-Lucent claims it is owed up to $4.56 billion. This is one of 15 patent suits Alcatel-Lucent filed against Dell and Gateway; Microsoft voluntarily added itself to the defendants. The judgment gives Alcatel the right to forbid Microsoft to use its MP3 software, and could open the floodgates for scores of lawsuits against other companies that use the technology. The decision might be affected by a case currently before the U.S. Supreme Court on the way patent damages should be calculated for international software companies. Microsoft has countersued Alcatel for its own patent infringements, and will battle Alcatel in court over the video-decoding technology in its Xbox 360 videogame console.

Sources: Forbes, Bloomberg,, Information Week, Wall Street Journal, Paid Content
Commentary: Alcatel-Lucent Won't Be Seeing Any Microsoft Money Soon [Information Week] • Jury finds against Microsoft in $1.5B dispute with Alcatel-Lucent [AP] • Microsoft Down Eight Straight Days: Reversal Time?Conference call transcripts: Alcatel-Lucent Q4 2006, Microsoft F2Q07
Stocks/ETFs to watch: Alcatel-Lucent (ALU), Microsoft Corp. (NASDAQ:MSFT), Gateway Inc. (GTW), Dell Inc. (DELL)

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