Microsoft Avoids Paying $1.5 Billion To Alcatel-Lucent, For Now

Finding that a jury's decision was "against the clear weight of the evidence," a judge on Monday set aside a record $1.53 billion verdict against Microsoft for allegedly infringing on two MP3 digital music patents held by Paris-based Alcatel-Lucent.

In overturning the February verdict, Judge Rudi Brewster, of U.S. District Court in San Diego, said that Microsoft's Windows Media Player does not infringe on one of the patents and found that the software maker had already licensed the other patent from a co-developer of the technology.

Brewster's rulings left open the possibility that Microsoft could face new trials in the case.

In a statement, Microsoft general counsel Brad Smith called Brewster's decision "a victory for consumers." Officials for Alcatel-Lucent called the ruling "shocking and disturbing."

Brewster's findings doubtless sent sighs of relief through the ranks of other manufacturers of MP3-related products as it lessens the chance they'll face a similar suit from Alcatel-Lucent.

Brewster overturned the jury's finding that the so-called backup HQ encoder on Windows Media player violated Alcatel-Lucent's claim to U.S. patent 5,341,457, which governs the "perceptual coding of audio signals." Brewster, in his 43-page decision, noted that, "Even Lucent's expert... testified that he had never observed the HQ encoder running."

Brewster also found that Microsoft had licensed for $16 million the second patent at issue -- U.S. patent RE 39,080 -- from Fraunhofer Gesellschaft of Germany, which co-developed the technology in concert with Lucent's former corporate parent AT&T. RE 39,080 is for a "rate loop processor for perceptual encoder-decoder."

Finally, Brewster said the jury erred when it awarded damages and royalties using a formula based on the number of Windows-based computers Microsoft sold during the period of alleged infringements. Brewster said there was no evidence to indicate that "the patented features themselves produced any customer demand or value of the product."

Alcatel-Lucent said it plans to appeal.