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Alcatel-Lucent (ALU)
Alcatel-Lucent $1.5 Billion Ruling Overturned
In February, a California federal jury ruled in favor of Alcatel-Lucent in their patent infringement suit against industry giant, Microsoft (MSFT: Charts, News, Offers). The $1.5 billion that Microsoft owed Alcatel-Lucent was the largest amount to ever be rewarded in a U.S. patents trial. Although the payment would have been relatively trivial for such a large company, Microsoft fought back, claiming their innocence. Yesterday the courts ruled that their previous decision has been reversed, clearing Microsoft from the infringement charges. How will Alcatel-Lucent respond, and what could result from another verdict in Alcatel-Lucent's favor?
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Alcatel-Lucent is a telecommunications company, and the two allegedly infringed patents were originally developed at AT&T's (T: Charts, News, Offers) Bell Labs, which eventually became a part of Alcatel-Lucent. These patents specifically relate to MP3 technology, which is used in many popular computer-run music players. The infringement claim arose because these patents are co-owned by both Alcatel-Lucent and a Germany company, Fraunhofer, and the latter company decided to license this technology to Microsoft and others, without the permission of Alcatel-Lucent. Alcatel-Lucent claimed therefore that their patents have been violated, a claim that was unanimously supported by the California jury back in February.
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Yesterday, however, the courts announced their new decision in Microsoft's favor, based on some new information and analysis. They declared that Microsoft did not actually infringe one of the patents, and additionally that since Alcatel-Lucent didn't have sole ownership of the patents they could not claim infringement. This decision clearly discourages Alcatel-Lucent, who was delighted by February's decision, both for the financial outcome of the individual case, and also because it would have set a precedent for many similar cases. If the courts had not overturned this decision, Alcatel-Lucent likely would have filed cases regarding the same patents against other industry leaders such as Apple (AAPL: Charts, News, Offers). Alcatel-Lucent also has many other current patent infringement claims against companies including Gateway (GTW: Charts, News, Offers) and Dell (DELL: Charts, News, Offers) for their use of user-interface technology, and additional claims against Microsoft for their use of video-decoding technology (used in Microsoft's gaming systems). All of these cases surely would have been strengthened by a decision in Alcatel-Lucent's favor.
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Alcatel-Lucent has already stated their desire to appeal this current decision. It's difficult to speculate how that situation would resolve, seeing as the courts have already come to two very different conclusions. Unless Alcatel-Lucent has more information or more convincing arguments, it's likely that the courts won't sway from their most recent decision. If Alcatel-Lucent, however, can somehow convince the courts that despite their lack of complete ownership of the patents they still deserve compensation for their losses, Alcatel-Lucent would be receiving much more than a large check. With one ruling in their favor, it would be hard for the courts to rule any other way in the other upcoming suits in which they are involved. It's now up to the courts to determine if Alcatel-Lucent deserves the damages payment after all, or if Microsoft is off the hook for good.
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