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2/23/2007
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Alcatel-Lucent Won't Be Seeing Any Microsoft Money Soon

Other companies may also get tangled in the legal mess that focuses on Microsoft's ability to play MP3 music files on its Windows Media Player.

Microsoft has lost a round in its bitter patent squabbles with Alcatel-Lucent, but the software maker is unlikely to be writing a check anytime soon for the $1.52 billion it has been ordered to pay the communications equipment maker.

A San Diego federal jury on Thursday ruled that Microsoft must pay the money for infringing on Alcatel-Lucent patents related to technology used to play MP3 music files in Windows Media Player. The ruling stemmed from one of several patent suits pending between the two companies that go back as far as 2003. "It's a tangled mess," Matt Rosoff, analyst for Directions on Microsoft, said of the disputes.

Microsoft has already said it's prepared to appeal the latest ruling. The software maker has taken the position that it, like hundreds of other companies, shouldn't be forced to pay again for a technology that it licensed legally for $16 million from a German company called Fraunhofer.

"We are concerned that this decision opens the door for Alcatel-Lucent to pursue action against hundreds of other companies who purchased the rights to use MP3 technology from Fraunhofer, the industry-recognized rightful licensor," Tom Burt, corporate vice president and deputy general counsel for Microsoft, said in a statement.

Alcatel-Lucent, on the other hand, said in a one-sentence statement, "We made strong arguments supporting our view and we are pleased with the court's decision."

Strong or not, the case is expected to continue for years. "Until all the appeals are exhausted, I'm not going to spend a whole lot of time analyzing (the case)," Rosoff said.

Mike McGuire, analyst for Gartner, likewise agreed that Microsoft wouldn't be dipping into its coffers anytime soon to pay Alcatel-Lucent. "I'd be hard pressed to see them doing that right now," he said. Instead, the industry will probably have to watch the appeal process unwind to see whether other companies using the MP3 technology such as Apple Inc. or Real Networks would also have to pay licensing fees to Alcatel-Lucent, McGuire said. "That's still a concern."

Microsoft and Lucent first locked legal horns in 2003, when the latter company sued Dell and Gateway over the use of software technology covered by Microsoft's indemnity agreement with the computer makers. Microsoft intervened and the fireworks began. Since then, other patent suits have been filed from both directions. "We will continue to defend our customers against unfounded claims and are pursuing a number of patent claims against Alcatel-Lucent," Microsoft's Burt said.

Alcatel-Lucent is not the first communications company to battle Microsoft over patents. This week, the software maker faced off against AT&T before the U.S. Supreme Court. At issue is whether Microsoft should be held liable for infringing an AT&T-owned patent on processes to digitally compress speech.

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