A federal jury in San Diego has ordered Microsoft to pay $1.5 billion to Alcatel-Lucent in a patent dispute over MP3 audio technology used in Windows. In its verdict, the jury assessed damages based on each Windows PC sold since May 2003. The case could have broader implications, should Alcatel-Lucent pursue claims against other companies that use the widespread MP3 technology.

In a statement, Microsoft Deputy General Counsel Tom Burt said that the verdict "is completely unsupported by the law or the facts. We will seek relief from the trial court, and if necessary, appeal." The company also noted that roughly half of the damages are for overseas sales of Windows, which could be affected by a separate patent case currently before the Supreme Court.

Microsoft said it believes that it properly licensed MP3 technology from Fraunhofer, paying the German company $16 million. Fraunhofer helped develop the MP3 compression technology and has licensed its intellectual property to companies that want to use the audio format in their products. "Therefore, today's outcome is disappointing for us and for the hundreds of other companies who have licensed MP3 technology. We are concerned that this decision opens the door for Alcatel-Lucent to pursue action against hundreds of other companies who purchased the rights to use MP3 technology from Fraunhofer, the industry-recognized rightful licensor," Burt said. Alcatel-Lucent's Ambrus declined to say whether the company might pursue other companies that use MP3 technology in their products.

Ed.note: Fraunhofer-IIS doesn't own the patent in the US? What's Alcatel's stake in MPEG-Layer 3? WTF...

Update: A week after Microsoft was ordered to hand over $1.5 billion in an Alcatel-Lucent MP3 patent dispute, a federal judge has ruled that the Windows maker did not violate a patent at the heart of a second trial that was set to begin soon. The ruling from the bench by U.S. District Judge Rudi Brewster in San Diego late Thursday relates to an Alcatel-Lucent patent covering speech coding technology, the companies said. The judge dismissed all of Alcatel-Lucent's claims, which means a jury trial set to begin March 19 will not proceed, Microsoft spokesman Jack Evans said. Alcatel-Lucent plans to appeal the ruling and is "comfortable with our chances of success as the case makes its way through the legal system," spokeswoman Joan Campion said Friday.