Yesterday Microsoft was walloped with a $1.5 billion verdict in U.S. District Court in San Diego for infringing on two patents held by Alcatel-Lucent concerning encoding and decoding MP3 files. (Alcatel-Lucent is like the third reincarnation of legendary Bell Labs.)

As you can imagine, this is a big deal for everyone involved in the online music biz. Though the case dealt specifically with Windows Media Player 10, other players, such as Apple, are certainly paying attention.

Microsoft claimed that they paid $16 million to properly license the technology from the Fraunhofer Institute for Integrated Circuits in Germany, which had worked on MP3 development. But the jury decided that they sorta forgot about Bell Labs. (But not willfully. If they had, the award would have been a lot bigger.)

A billion and a half is believed to be the largest patent infringement verdict ever. The jury came up with that number by multiplying the number of Windows-based PCs sold worldwide by a 0.5% royalty. Then they multiplied by 2, for each patent infringed. (Following me so far?)

Stop a moment and put that number in perspective — Microsoft generates a billion dollars of revenue a month.

But they’re appealing anyway. According to the Seattle Post-Intelligencer, Tom Burt, Microsoft deputy general counsel said, “It’s an astounding number. We think it will never survive appellate review.” He also called the award “particularly outrageous.”

Gotta go. My cassette of Dark Side of the Moon just jammed and I have to unwind it.

Submitted by: Dan Giancaterino, Education Services Manager
on February 23, 2007 - 11:55 am

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