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Microsoft and AT&T Settle Up

AT&T is the latest company to get Microsoft to settle a patent infringement lawsuit, closing yet another chapter of the Redmond, Wash.-based software vendor's legal woes.

In a joint statement Friday, the companies said they have entered into a settlement agreement and consented to a stipulated judgment regarding their patent lawsuit. The case went before a New York jury February 26, with the New Jersey-based telco asking for $90 million in damages.

The suit, filed in May 2000, complained that Microsoft infringed on AT&T's "580 Patent," which covers a technique to apply a codec to speech signals that compresses them so they can travel faster over networks and take up less storage space. The patent was issued in 1981 and reissued in January 1988.

The suit pointed to the use of Microsoft's TrueSpeech voice codec in Windows operating systems since Windows 95, as well as its use in the NetMeetings Internet conferencing technology, Windows Messenger and Exchange 2000 Conferencing Server. The TrueSpeech technology was developed by DSP Group , a Santa Clara, Calif.-based company that develops digital signal processors and software. TrueSpeech uses a codec patented by Leon Bialik, who went on to co-found AudioCodes , an Israeli company working with VoIP .

AT&T notified Microsoft of the infringement in 1999, according to the complaint, and the companies had been in negotiation ever since. But Microsoft refused AT&T's license offer, and the suit went to trial.

Details of the settlement are confidential, AT&T spokesperson Jim Burns told internetnews.com. A company statement said that Microsoft settled most of the claims in the original suit with a lump payment. The two companies agreed to appeal a single issue, with another payment contingent on the outcome.

"There is always a degree of risk and uncertainty with litigation, and we felt settlement was the best avenue to resolve this matter," Microsoft spokesperson Stacy Drake McCredy said. "AT&T has been an important business partner, and we are pleased to have reached this settlement with them."

In fact, in the same year that AT&T began to complain about TrueSpeech, Microsoft took a $5 billion stake in the telco as part of a strategic partnership for the development of next-generation broadband and Internet services.