Alcatel-Lucent appeals loss of $1.5 billion award

WASHINGTON (Reuters) - Appeals court arguments in a battle over MP3 digital music patents between Alcatel-Lucent ALUA.PA and Microsoft Corp MSFT.O focused Monday on a joint development pact struck nearly two decade earlier.

Alcatel-Lucent CEO Patricia Russo delivers her speech at the 2007 annual results news conference in Paris February 8, 2008. REUTERS/Benoit Tessier

Alcatel-Lucent is looking to restore a $1.5 billion judgment against Microsoft awarded by a lower court jury that was later overturned.

Much of the arguments before the U.S. Court of Appeals for the Federal Circuit centered on a 1989 joint development agreement between AT&T and German research organization Fraunhofer Gesellschaft.

Microsoft has said that it licensed the MP3 technology from Fraunhofer for $16 million, and is innocent of any infringement.

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

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

The case caused an uproar last year when a jury in San Diego ruled that Microsoft had infringed two patents and awarded Alcatel-Lucent $1.5 billion.

But U.S. District Judge Rudi Brewster disagreed with the jury, and said Microsoft had not violated one of the patents and had licensed the other. The judge threw out the jury’s award.

“We are hopeful that they (federal circuit judges) will agree that the jury was correct in its original judgment and that the jury’s verdict should be reinstated,” Alcatel-Lucent said on Monday in a statement.

Microsoft reiterated its innocence. “Judge Brewster was correct when he ruled that Microsoft did not infringe the ‘457 patent and that Microsoft properly licensed the technology embodied in the ‘080 patent from its co-owner and industry recognized MP3 licensor -- Fraunhofer,” said Microsoft spokesman David Bowermaster.

Reporting by Diane Bartz; Editing by Tim Dobbyn