RealTime IT News

Video-Coding Case a Charm for Microsoft

Microsoft (NASDAQ: MSFT) dodged another bullet in its ongoing patent fray with Alcatel-Lucent (NYSE: ALU) this week, when a jury in San Diego found that the software titan did not infringe on a video-coding patent the other firm owns.

The jury also decided that four of Microsoft's patents are valid. However, Alcatel-Lucent did not infringe them. Alcatel-Lucent had been seeking $419 million in damages in the case.

The trial was the last of three questioning whether Microsoft had infringed on several Alcatel-Lucent technologies.

It was just the latest in the dispute between the two companies. Due to the complexity of the case – it involved a total of 15 patents -- a federal judge broke the litigation into multiple trials. Five trials were originally planned, but after legal jockeying and pre-trial rulings, it was cut down to three. This was the third.

As is typical in cases such as this one, both sides were quick to claim whatever advantage they had won in the long-running case.

"We are gratified that the jury found Microsoft did not infringe Alcatel-Lucent’s video-decoding patent and rejected Alcatel-Lucent’s exorbitant $419 million damages claim," Tom Burt, Microsoft corporate vice president and deputy general counsel, said in a statement e-mailed to InternetNews.com.

Meanwhile, Alcatel-Lucent put its own spin on its victory in Microsoft's countersuit, which had alleged that the hardware maker infringed on four of the software developer's patents.

"We believed from the beginning that Microsoft patent infringement allegations against Alcatel-Lucent were without merit and we presented a strong defensive argument," said an Alcatel-Lucent statement e-mailed to InternetNews.com. "We are pleased that the jury agreed with us on this."

The rhetorical maneuverings are the standard stock in trade for big companies suing other big companies, one analyst said. Additionally, the suits themselves are not particularly unique.

"These cases are part of the normal cost of doing business as a large company. I don't think they're particularly significant -- they're disputes between two large companies with lots of patents," Matt Rosoff, lead analyst for corporate news at Directions on Microsoft, told InternetNews.com in an e-mail.

The case began in 2003 when Lucent, which later became Alcatel-Lucent filed patent infringement suits against Dell (NASDAQ: DELL) and Gateway (now owned by Taipei, Taiwan-based Acer) claiming violation of MP3-related patents it owns.

Microsoft stepped in to indemnify the two PC OEMs, whose computers ship with its operating systems software. Along the way, it filed its own countersuits.

In February 2007, a San Diego jury found Microsoft had infringed on Alcatel-Lucent's MP3 patents and awarded the plaintiff damages of $1.52 billion -- the largest award ever ordered in a patent suit.

However, in August, the judge overturned the jury's decision and the damages award, ruling that Microsoft had legitimately paid for the use of one questioned patent and had not infringed the other patent at issue.

Microsoft lost the second of the cases in April 2008, when a jury found it had violated a pair of patents related to touchscreen and user interface technologies, and ordered the company to pay $367 million. That verdict is under appeal and a hearing is scheduled next Friday to consider post-trial motions, but a date to hear the appeal has not yet been set.

In addition, in March 2007, Microsoft took its case to the U.S. International Trade Commission (ITC) with the goal of blocking imports of some Alcatel-Lucent products into the United States. In January, an ITC judge agreed with Microsoft but was later overturned by a panel of ITC judges.

Even once all the trials and complaints are done, however, appeals and negotiations could go on for years. In fact, the drawn-out process to date puzzles Rosoff, who has closely tracked this case, as well as others through the years. "I am somewhat surprised the companies weren't able to come to a cross-licensing agreement, as that's normally how such disputes are resolved. But this litigation's been going on for six years now, so the chance for that type of agreement is probably long past," Rosoff said.