Appeals Court Saves Microsoft $358 Million

A federal appeals court ruled Friday that a $358 million damage award against Microsoft in a patent lawsuit is exorbitant, but still found that the software giant had still infringed a patent held by Alcatel-Lucent.

The court sent the case back to the lower court to reassess damages.

Both companies immediately claimed victory, with each looking to their particular benefits in the ruling and downplaying the negatives.

“We are very pleased with this decision by the U.S. Court of Appeals for the Federal Circuit [in Washington] affirming the jury’s decision that Microsoft infringed the Alcatel-Lucent ‘Day’ patent and that the Day patent is a valid patent,” Mary Ward, a spokesperson for Paris, France-based Alcatel-Lucent, said in an e-mail to

The so-called “Day” patent Ward referred to was found by the lower court to be infringed by technology that Microsoft (NASDAQ: MSFT) incorporated into Outlook to provide a date-picker function in Outlook’s calendar feature.

In its ruling, the appeals court validated Alcatel-Lucent’s patent, but sided with Microsoft’s argument that the date-picker function is only a tiny portion of Outlook’s feature set. Therefore, basing the damage award on the entire value of Outlook sales — some 110 million units over multiple releases of Office, of which Outlook is a part — was not a valid approach.

“Outlook consists of millions of lines of code, only a tiny fraction of which encodes the date-picker feature …. numerous features other than the date-picker appear to account for the overwhelming majority of the consumer demand and therefore significant profit,” the appeals court ruling said.

That was the part of the ruling that Microsoft heralded as a victory.

“We are pleased that the Court vacated the damages award, and we look forward to taking the next step in the judicial process,” Kevin Kutz, a Microsoft spokesperson, told in an e-mail.

A federal jury found Microsoft had violated the Alcatel-Lucent patent in April 2008 and awarded the plaintiffs $358 million, which the lower court judge upheld in June 2008. Microsoft appealed and the appeals court Friday upheld the patent but remanded the damages portion to the lower court to be retried.

No schedule has been set for the next court date in the case.

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