August 7, 2007 1:02 am

Microsoft’s $1.53bn judgment overturned

A $1.53bn award against Microsoft, the biggest patent infringement judgment ever handed down by a jury, was thrown out by the US trial court judge on Monday.

Alcatel-Lucent, the French telecoms equipment company that had prevailed in the first round of the case earlier this year, quickly denounced the decision as “shocking and disturbing” and said it planned to appeal.

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The case stemmed from Microsoft’s use of the MP3 digital music format, and has been seen as having potentially wide-ranging implications for other companies involved in digital media.

Brad Smith, Microsoft’s general counsel, called the latest ruling “a victory for consumers of digital music and a triumph for common sense in the patent system.”

Judge Rudi Brewster, in Federal court in San Diego, overturned the verdict six months after it was handed down, after listening to post-trial motions from Microsoft. In its original verdict, the jury concluded that Microsoft’s use of MP3 had infringed on two Alcatel-Lucent patents, and ordered it to pay $1.52bn in damages.

Like most other companies engage in digital media, Microsoft licenses MP3 patents instead from the Fraunhofer Institute, a German body that was jointly responsible for developing the technology along with AT&T. The US telecoms company’s own patent rights in MP3 were later spun off along with Lucent, which was eventually acquired by Alcatel.

Judge Brewster threw out the verdict on one of the dispute patents on the grounds that it was co-owned by Fraunhofer. US law requires co-owners to sue jointly in such cases, and Microsoft had already licensed the technology from Fraunhofer. He also ruled that Alactel-Lucent had failed to prove that Microsoft infringed on the other patent.

If the French company goes on to prevail on appeal, the original case should be head again at the district court level, the judge said.

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