Microsoft, Dell owe about US$2.45 billion: witness

BIG NUMBERS: One of the disputed patents, owned by a trust created by Lucent Technologies, concerns tools used to play DVDs, digital TV and computer games

BLOOMBERG
Tuesday, Mar 18, 2008, Page 11

Microsoft Corp, the world's largest software maker, and Dell Inc owe more than US$2.45 billion to Alcatel-Lucent SA for infringing its patented computer technology, a witness for Lucent told jurors.

Microsoft should pay US$1.99 billion for violating four patents with products such as its Windows Media Player, Vista computer operating system and Xbox 360 game console, damages expert Wayne Hoeberlein said yesterday in a trial in federal court in San Diego. Dell should pay US$465.6 million, said Hoeberlein, of UHY Advisors Tax & Business Consultants.

"These are big numbers, but they are based on the sales of millions of systems," Hoeberlein told the panel of eight women and one man.

Alcatel-Lucent, the world's biggest maker of telecommunications equipment, is seeking the biggest patent infringement verdict in US history.

The Paris-based company claims infringement of patents covering the MPEG-2 form of digital video, computer form-entry technology and the use of a stylus on handheld devices. Hoeberlein testified as a damages expert on the company's behalf.

The patent-infringement trial is the second round of cases by Alcatel-Lucent against Redmond, Washington-based Microsoft and Round Rock, Texas-based Dell. In the first trial, held last year, a San Diego jury awarded Alcatel-Lucent US$1.52 billion in a dispute over the MP3 computer audio standard, the highest-ever verdict in a patent trial. A judge later threw out the award.

Microsoft and Dell contend they didn't violate the patents.

"We continue to believe that the patents are invalid and not infringed and that Lucent is not entitled to any damages," Microsoft spokesman Jack Evans said in an e-mail. "We look forward to putting on our case."

Jess Blackburn, a spokesman for Dell, said the company doesn't comment on ongoing litigation.

One of the disputed patents, covering technology used to play DVDs, digital TV and computer games, is owned by a trust that Lucent Technologies Inc formed before it merged with Alcatel SA last year.

Lucent Technologies was launched in 1996 when AT&T spun off its Bell Labs unit. Alcatel-Lucent was created in 2006 through Alcatel SA's acquisition of Lucent.

Microsoft and Dell are pursuing claims that Alcatel-Lucent wrongly set up a trust just before the merger to hold some patents, violating an agreement to share the inventions as part of a patent-licensing pool.

The trial before US District Judge Marilyn Huff is expected to last into next month, with more than 100 potential witnesses listed in court papers. The case is the latest chapter in a six-year dispute that began when Lucent accused Dell in 2002 of using its patented inventions and demanded royalties.

Microsoft was drawn into the case because it may have to reimburse Dell, which uses Microsoft's Windows operating system in the computers it sells. Microsoft countersued, claiming the Lucent patents aren't valid and challenging other patents held by the company as well.

The Gateway unit of Taipei, Taiwan-based Acer Inc was a defendant in the case before settling on Feb. 14. Terms of the accord weren't disclosed. Alcatel-Lucent had sought more than US$300 million in damages from the computer maker.