Alcatel-Lucent Wins Massive Damages from Microsoft

Alcatel-Lucent has been awarded a staggering US$1.52 billion in damages by a court in the USA after they sued over an MP3 patent. The patent was apparently used within the Microsoft Windows Media Player.

To put this award into context - in 2006, Alcatel-Lucent reported an operating profit of a shade over €1 (US$1.3) billion This award, if upheld would have more than doubled their annual profits last year.

"We have made strong arguments supporting our view, and we are pleased with the court's decision," said Alcatel-Lucent spokeswoman Joan Campion. Microsoft said it will seek relief or may appeal the ruling.

Microsoft had actually paid $16 million for a license from Fraunhofer Institute, which co-developed the MP3 format. However, as that work was done in cooperation with Bell Labs which is now part of Alcatel-Lucent, the company chose to sue for patent infringement.

Fraunhofer-Gesellshaft developed MP3 technology and is the owner of a key US Patent 5,579,430 'Digital encoding process' filed in Jan '95 and issued in Nov '96. MP3 research was started by Fraunhofer in conjunction with Bell Labs in 1987.

Alcatel-Lucent holds US Patent RE36714 'Perpetual coding of audio signals' which lists Brandenburg as a co-inventor. This patent was filed in Nov '94, pre-dating the Franuhofer patent, and was reissued in May 2000.

Sandeep Malhotra, analyst with Merrill Lynch notes that if it is true that Alcatel-Lucent does own a "key patent" in the MP3 format, then their lawyers could target companies such as Apple over patent infringement."

Posted to the site on 23rd February 2007