$1.5 billion in damages assessed against Microsoft
February 23, 2007
A federal jury ruled on Thursday that Microsoft (NASDAQ: MSFT) must pay $1.5 billion to Alcatel-Lucent SA (Euronext: ALU; NYSE: ALU; TYO: 6687) for violation of two patents that concern coverting audio into digital MP3 files on personal computers. Lucent Technologies, which was acquired by Alcatel last year, filed 15 patent claims against two other computer companies, Gateway Inc. (NYSE: GTW) and Dell Inc. (NASDAQ: DELL; SEHK: 4331) in 2003. In April of that year, Microsoft added itself to the list of defendants because it claimed the patents were closely related to its Windows operating system. Two of those claims were ultimately thrown out and six separate trials were set to try the remaining claims, which touch areas such as speech and video coding and the Windows user interface.
An attorney for Microsoft said that Thursday’s verdict was “completely unsupported by the law or the facts”. In the trial, Microsoft said that Alcatel-Lucent’s patents do not govern its MP3 encoding and decoding tools and that it licenses its MP3 technology from German company Fraunhofer-Gelleschaft. Further, it said that the damage award was “outrageous” considering the fact that its licensing fees to the German company was only $16 million. The damages were calculated, according to Microsoft, by multiplying the sales volumes of Windows by PC sales prices globally since May 2003.