U.S. Court Fails to Reinstate $1.5 Billion Lucent Award

WASHINGTON (Reuters) – Alcatel-Lucent (ALUA.PA: Quote, Profile, Research, Stock Buzz) lost a fight to win back a $1.5 billion award against Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) when an appeals court ruled Thursday in favor of the software giant in a battle over patents to digitize music.

A lower court jury in San Diego found in February 2007 thatMicrosoft had infringed two MP3 digital music patents and orderedMicrosoft to pay $1.5 billion. In August 2007, U.S. District Judge RudiBrewster disagreed with that jury, saying Microsoft had not violatedone of the patents and had a license for the other one. The judge threwout the jury’s award.

On Thursday, the U.S. Court of Appeals for the Federal Circuit, which hears appeals in patent cases, agreed with Brewster.

"We affirm the lower court’s grant of JMOL (judgment as a matter oflaw) based on lack of standing for one patent and based onnon-infringement for the other patent," the court said in its ruling.

The dispute centered on a 1989 joint development agreement betweenAT&T and German research organization Fraunhofer Gesellschaft.

Microsoft maintained it obtained a license for the MP3 technologyfrom Fraunhofer for $16 million and was innocent of any infringement.

But Alcatel-Lucent argued the patent was based on work donepreviously by Bell Labs, now the research arm for Lucent Technologies,and could not legally be licensed by Fraunhofer to Microsoft. Lucentwas spun off from AT&T in 1996 and owns Bell Labs.

MP3 is the standard digital music format, which allows audio to becompressed so it can be easily played on computers, mobile phones ordigital music players.

Alcatel-Lucent said it had not yet decided on an appeal.

"We are disappointed with the Court’s decision on this matter," saidspokeswoman Mary Ward. "We will review our options to see what steps weshould take."

(Reporting by Diane Bartz; Editing by Tim Dobbyn and Andre Grenon)