The latest twist in the patent dispute between Microsoft and Alcatel-Lucent demonstrates how difficult it can be for a business to enforce patent rights it thinks it holds. Even when a company gets a favorable verdict, true victory may be a long way off.
In February of 2007, a jury sat through 3 weeks of trial and 4 days of deliberation resulting in a unanimous verdict that Microsoft must pay $1.52 billion for infringing Alcatel’s patent rights. On August 6, however, Judge Brewster of the United States District Court for the Southern District of California ruled that the jury’s damage award could not stand because one of the two patents was not infringed. In the 43 page opinion, the court determined that they jury’s verdict was “against the clear weight of the evidence,” and that Microsoft had a valid license to the patent co-owned by the Fraunhofer Institute, a German research institute.
Alcatel-Lucent is the world’s largest maker of telecommunications equipment. This particular dispute arose over Alcatel-Lucent’s MP3 digital music format developed years go. In 1989, AT&T Corp and the Fraunhofer Institute agreed to develop the MP3 format. MP3 has since become widely used by individuals and companies worldwide. Microsoft contended that it paid $16 million for the rights to the technology by licensing it from a co-owner of the patent. The district judge disregarded the jury’s verdict and agreed with Microsoft that its license of the technology was valid. The decision will affect many other companies that have also licensed MP3 technology. For instance, companies like Apple Inc. and RealNetwork feared legal potential liability should Alcatel prevail in its claims with respect to the MP3 patent.
Although this would have been the largest patent verdict in US history, Alcatel still hoped for a higher damage award, and to obtain a precedent setting verdict. Specific to this case, Alcatel complained that the jury award only covered sales through November 2005. That motion was denied however, because Alcatel was “no longer the prevailing party.” Alcatel hopes this decision won’t stick around long and plans on appealing it. The appeal of this verdict is one to follow closely.
Alcatel is also pursuing at least six other cases concerning the use of technology developed at Bell Labs, which is now owned by Alcatel-Lucent. Stay tuned for the other disputes, including those concerning video coding on Microsoft’s Xbox game console and Window’s interface.