Alcatel-Lucent Seeks Payment of $1.53 Billion Microsoft Verdict

WASHINGTON -(Dow Jones)- Alcatel-Lucent appeared before a federal appeals court Monday asking that a $1.53 billion jury verdict for it against Microsoft be reinstated.

The case, in which Alcatel-Lucent says Microsoft's Windows Media player infringed on two of its patents, has the highest profile of several patent cases pending between the two companies.

Alcatel-Lucent Spokeswoman Mary Ward said the company plans to defend its patents aggressively. "The reason we're pursuing this particularly vigilantly is this is our intellectual property. It's really a vital asset, and we're going to defend it."

At trial last year, Alcatel-Lucent argued that Microsoft's audio software violated its patents relating to MP3, the most popular file format used to store digital audio.

Last August, a district court judge said Microsoft didn't have to pay the $1.53 billion jury award because it wasn't in violation of one patent and had licensing rights to the other. On the second point, the judge cited a joint ownership agreement of the MP3 patent held by Germany's Fraunhofer Institute and AT&T Inc. (T).

During oral arguments Monday before the U.S. Court of Appeals for the Federal Circuit, Microsoft's attorney John Gartman defended Microsoft's licensing agreement with Fraunhofer, saying that license covers the patents asserted by Alcatel-Lucent.

Gartman told the three-judge panel that the joint ownership rights held by AT&T and Fraunhofer extend to any license or intellectual property that stems from their collaboration.

The MP3 patents were originally filed by researchers at Bell Labs, the research and development arm of the old AT&T. When AT&T spun off Lucent Technologies in 1996, Lucent retained much of the Bell Labs patent portfolio. French firm Alcatel SA subsequently agreed to acquire Lucent in 2006, forming Alcatel-Lucent.

Alcatel-Lucent initially sued computer makers Gateway and Dell over a series of patents in 2003, and Microsoft subsequently stepped in on their behalf. Alcatel-Lucent claimed computers made by Gateway and Dell using Microsoft products infringed on its patents.

A judge later divided the case into several parts based on the types of patents involved.

The U.S. Federal Circuit Court, which hears all patent appeals, is likely to hear more about the original Alcatel-Lucent complaints against Dell and Microsoft. In April, a jury ordered Microsoft to pay $367.4 million to Alcatel-Lucent over another patent violation. Last month, a district judge upheld the jury verdict and added to the damages, saying Microsoft owed some $500 million. Microsoft plans to appeal that decision.

The litigation could spark some interest on Capitol Hill, where lawmakers have been mulling changes to patent law, including relief from large damages. The $1.5 billion verdict against Microsoft is often cited as an example of out-of-control damages.

-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 7th July 2008