Microsoft ordered to pay out over MP3 suit

Alcatel-Lucent has beaten Microsoft in a billion-dollar patent suit relating to MP3 sound file technology. Microsoft must now pay Alcatel-Lucent $1.52 billion.

Alcatel-Lucent claimed that its Bell Labs subsidiary owns patents on technology which encodes audio in the MP3 format. Microsoft said that a licence it has from German firm Fraunhofer-Gesellschaft entitled it to incorporate MP3 encoding in its Windows operating system.

In 2003, before it merged with Alcatel, Lucent filed 15 claims of patent infringement against PC makers Gateway and Dell. Microsoft chose to join the case as a defendant because it said that the claims of infringement touched on its Windows system.

Though Alcatel-Lucent was awarded $1.52 billion by a San Diego court and not the $4.5 billion it originally sought, the case is still a victory for the network equipment maker.

"We've made strong arguments supporting our view, and we are pleased with the court's decision," said an Alcatel-Lucent spokeswoman.

Microsoft said that the court made the wrong decision.

"We think this verdict is completely unsupported by the law or the facts," said Tom Burt, Microsoft deputy general counsel. "We believe that we properly licensed MP3 technology from its industry recognized licensor, Fraunhofer. The damages award seems particularly outrageous when you consider we paid Fraunhofer only $16 million to license this technology," Burt told news agency AP.

The decision could affect other companies which licence MP3 technology from Fraunhofer, including household names such as Apple, Sony and Nokia. Microsoft said it would appeal the decision.