Microsoft, Lucent battle in huge patent case

Microsoft CEO Steve Ballmer speaks to shareholders at the Microsoft annual shareholders meeting in Bellevue, Washington, November 19, 2008.

WASHINGTON (Reuters) - Microsoft Corp (MSFT.O) argued before an appeals court on Tuesday that its Outlook calendar date-picker tool did not infringe an Alcatel-Lucent (ALUA.PA) patent and asked for a $358 million jury verdict to be overturned.

The lawsuit is the last remaining after Alcatel-Lucent and Microsoft settled other patent fights in December. The case was appealed from a district court in San Diego, where a jury ruled that Microsoft did infringe and ordered it to pay $358 million, or $511 million including interest.

The lawsuit had also been viewed as an opportunity for the Federal Circuit to address the damages issue in patent reform pending in Congress although it was not immediately clear if the court would do so.

Microsoft's attorney, Constantine Trela of Sidley Austin LLP, argued that the patent for the technology, which allows Outlook users to click on a date to open it rather than typing it in, was invalid because it was an obvious extension of earlier technology.

Trela further argued that if the patent was found to be valid, it was not Microsoft which infringed but Outlook users. And Alcatel-Lucent failed to show that anyone used a mouse to choose a date in Outlook, said Trela.

"You have to show that somebody did it," said Trela. "There's no proof here that it happened. That's the fundamental problem."

Arguing for Alcatel-Lucent, John Desmarais of Kirkland Ellis LLP disputed Trela's assertion that the patent should not have been granted because it was a small, obvious improvement on existing technology. "What you're talking about here, in 1985, 1986, nobody was doing it," he said.

Microsoft has also asked the patent office to reassess the patent. The patent office declared it invalid although Alcatel is in discussions with the patent office.

If Microsoft is found guilty of infringing, Trela argued that the jury damages were excessive because the award was based on Outlook's entire market value. "The thing that drives demand for Outlook is email. That's what people use it for," he said.

(Reporting by Diane Bartz; Editing by Richard Chang)