Goliath under fire from all sides

A US federal jury has found that Microsoft infringed audio patents held by Alcatel-Lucent and ordered the company to pay $1.52bn in damages. If upheld on appeal, it would be the largest patent judgment on record. However, Microsoft has claimed the verdict is not supported by the law and that it had already licensed the disputed MP3 technology from Germany\'s Fraunhofer for $US16m. It plans to appeal against the ruling if necessary. AustralianIT reports that Alcatel-Lucent had accused Microsoft of infringing patents related to standards used for playing MP3 digital music files. One analyst said the decision meant Alcatel-Lucent may seek payments from providers of software and hardware that supports MP3 files, including Apple\'s iPod and iTunes. Goldman Sachs analyst Rick Sherlund said, for Microsoft, the fine represents about six weeks of cash flow or about 15c per share – a charge that most analysts would likely take in stride. \'Patent cases also tend to drag through the appeals process so this may not be the final judgment. We observe Microsoft has 10 counter claims pending, perhaps implying some eventual negotiated settlement,\' Sherlund added. The New York Times quotes John Desmarais, a partner with Kirkland & Ellis who represented Alcatel, as saying the proposed damages were consistent with patent law. Jack Russo, a patent lawyer with Russo & Hale said Microsoft was at a competitive disadvantage, as it did not file for patents for \'many, many, many\' years\'. He said that made it harder to work out deals with other large companies in which they exchanged the rights to each other’s patents. Large companies like AT&T and IBM ‘have huge patent portfolios and that represents large and unpredictable risks for companies like Microsoft,\' he said. Full AustralianIT report Full report in The New York Times

In terms of its second patent dispute, Microsoft has also taken its battle with telecommunications giant AT&T to the US Supreme Court, in a case that has wide implications for US firms doing business abroad. The Citizen reports that the nine Supreme Court justices heard oral arguments in the case that hinges on whether US patent law can be extended to protect US-patented software code sold overseas by a US company or sent abroad to be used in products manufactured overseas. AT&T said Microsoft provided the AT&T Software to foreign computer makers on \'golden master discs\' and in electronic transmissions. The computer makers copy the software and install copies on their PCs. The International Herald Tribune reports that the justices expressed doubts about whether Microsoft should be liable. They sharply questioned AT&T\'s assertion that software code could be deemed a \'component\' of a computer, which would make overseas sales of the software an infringement under US patent law. Two justices expressed concern that a ruling against Microsoft could unintentionally subject other products sold overseas to US patent law. According to a SignOnSandiego.com report, the case has implications beyond the technology sector and, depending on the outcome, could encourage US manufacturers to establish more research and development facilities abroad. Microsoft acknowledged that it violated AT&T\'s patent on speech encoding technology when it sold Windows in the US, but disputes that it should be held responsible for infringement when the software is copied by foreign computer manufacturers. Full report in The Citizen Full International Herald Tribune report Full SignOnSandiego.com report