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Microsoft prevails on MP3

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Times Staff Writer

A federal judge on Monday reversed his own jury and threw out a surprising $1.5-billion patent verdict against Microsoft Corp., removing a liability threat to hundreds of companies whose products work with the most common digital music format.

Senior U.S. District Judge Rudi M. Brewster of San Diego freed Microsoft from having to pay French telecommunications equipment maker Alcatel-Lucent one of the largest patent awards ever granted.

Overturning a jury’s February verdict, the judge ruled that Alcatel didn’t have the rights to one disputed patent and hadn’t proved that Microsoft’s programs were using the technology in another.

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Alcatel immediately promised an appeal.

Alcatel had sued computer makers, alleging that Windows Media Player, which comes pre-installed on many computers, ran afoul of patents related to the MP3 format for music files.

Microsoft, the maker of the Windows operating system and media player, intervened on behalf of the computer companies and fought back.

“The great thing about a verdict like this is it removes a cloud over the entire industry,” said Jonathan Potter, executive director of the Digital Media Assn., a trade group. “It’s not only MP3, but it’s everything that works with MP3 -- multiple generations of products and services.”

Apple Inc., Sony Corp. and virtually every other company that makes music software or devices that play digital music had been at risk. “It’s an enormous relief for the industry,” he said.

Germany’s Fraunhofer Institute has been issuing licenses for MP3 technology for years, and Microsoft and others thought their payments to Fraunhofer entitled them to use the methods for encoding files and playing them back.

But Alcatel inherited some patents from Bell Labs when it bought Lucent Technologies last year, and it has been claiming that the MP3 technology also relied on the Bell Labs patents.

During a trial in January and February that involved complex factual and legal issues, Alcatel convinced a jury that Microsoft had infringed two of its patents. The jury awarded what it said was half of 1% of the revenue from all the Windows-based computers sold during the period in question.

Brewster heard post-trial motions and entered the judgment against Microsoft in April, more than two months after the jury verdict.

But he reversed course after weighing additional arguments made in July. In a new, 43-page ruling, Brewster wrote that Bell Labs had contributed only some of the ideas in a key patent that had been assigned to Fraunhofer.

The other patent, he said, hadn’t been shown to have been infringed by Microsoft, and a “reasonable jury” presented with the relevant evidence couldn’t have found otherwise.

The judge also said that the jury’s formula for awarding damages didn’t hold up under scrutiny and that Microsoft should get a new trial on just the amount of the award, even if his other decision was reversed.

Microsoft General Counsel Brad Smith called the decision “a victory for consumers of digital music and a triumph for common sense in the patent system.”

Alcatel said it was stunned.

“This reversal of the judge’s own pretrial and post-trial rulings is shocking and disturbing,” said spokeswoman Mary Lou Ambrus. “We still have a strong case, and we believe we will prevail on appeal.”

Ambrus said Alcatel had continued to negotiate license payments from other companies after the February verdict but had not filed any new suits.

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joseph.menn@latimes.com


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