KAI RYSSDAL: Shares of the French company Alcatel-Lucent added 2.5 percent in Paris today. A federal jury in California has ordered Microsoft to cough up a $1.5 billion for infringing on Alcatel's MP3 patents. Sarah Gardner reports the ruling might spell trouble for hundreds of other companies that turn music into ones and zeros.
SARAH GARDNER: Microsoft uses MP3 in its Windows Media software. It argued in court that it had already shelled out $16 million to a German research group for an MP3 license — the "rightful" licensor in its opinion. But the jury sided with Alcatel-Lucent, whose lawyers argued that their company invented MP3 and "everybody else was making money off of it." Technology analyst Rob Enderle, who has Microsoft as a retainer client, says the outcome of this case surprised him.
ROB ENDERLE: We didn't really think this was going to be big or important. It turned out to be both.
Enderle says the verdict has serious implications for Apple, Hewlett-Packard and all the other companies that licensed the MP3 technology from the same German outfit as Microsoft. He says Alcatel could end up suing them for patent infringement as well. But that could be years away.
Intellectual property attorney Daniel Harris expects Alcatel will wait for the results of other related litigation, and Microsoft will likely appeal this verdict.
DANIEL HARRIS: And it's far from certain whether this $1.5 billion judgment is going to be left standing at the end of the day.
An Alcatel spokeswoman today said she wouldn't speculate whether it would go after other companies that use MP3.
But analyst Rob Enderle says Alcatel may start quietly approaching firms like Apple. He guesses it will offer them a cheaper licensing deal if they pay up now. Still, those companies may just want to hedge their bets and see if the verdict against Microsoft will be reversed.
I'm Sarah Gardner for Marketplace.