Federal Circuit Affirms District Court Set Aside of the $1.5 Billion Jury Verdict in the MP3 case of Lucent Technologies vs. Gateway, Dell & Microsoft

The United States Court of Appeals for the Federal Circuit has affirmed the United States District Court for the Southern District of California in that district court’s set aside of a $1.5 billion jury verdict for Lucent Technologies in a highly significant industry standard ISO 11172-3 Audio Layer 3 (MP3) patent case which we wrote about previously as follows:

1) Patent Insanity in the USA Continues as Jury Awards Record MP3 Verdict
Only one word accurately defines the current state of US patent law and its judicial consequences – and that word is “comedy”. Take a look at the newest record jury award of a preposterous $1.5 billion for some insignificant alleged Microsoft violation of some obscure alleged MP3 precursor patent of Lucent-Alcatel, a patent which is allegedly traced back to the initial witchly stirrings of a codec whose ingredients were initially cooked with the mice and the rats in the dungeon pots of Bell Laboratories.

2) MP3 Shows that America is being Trounced by Europe on the Corporate Battlefield

The Alcatel-Lucent Patents in the Patent Suit Against Microsoft

An American jury has just awarded the French company Alcatel-Lucent $1.5 billion for the patents below, to be paid by Microsoft (but of course, the bill is actually paid ultimately by the American consumer), and Alcatel-Lucent have numerous patent suits more in the pipeline against Microsoft.

Will French ultimately own Microsoft?

US Patent 5,341,457 – Abstract
Perceptual coding of audio signals
“A technique for the masking of quantizing noise in the coding of audio signals is adapted to include geometric interpolation between the thresholds for a tone masking noise and for noise masking a tone, in order to reduce use of bit-rate capability where it is not necessary for transparent or high quality. The technique is usable with the types of channel coding known as “noiseless” or Huffman coding and with variable radix packing. The stereophonic embodiment eliminates redundancies in the sum and difference signals, so that the stereo coding uses significantly less than twice the bit rate of the comparable monaural signal. The technique can be used both in transmission of signals and in recording for reproduction, particularly recording and reproduction of music. Compatibility with the ISDN transmission rates known as 1 B, 2 B and 3 B rates has been achieved.”

One of the inventors of the above patent, James David Johnston, retired from AT&T and became an audio architect for Microsoft Corporation. See Perceptual Coding of Audio Signals – A Tutorial. Is that the root of the problem? Johnston is also the inventor of the following patent.

US Patent RE39080
Rate loop processor for perceptual encoder/decoder
This is a reissue application of U.S. Pat. No. 5,627,938 filed Sep. 22, 1994 as application Ser. No. 08/310,898 which is a continuation of application Ser. No. 07/844,811, filed on Mar. 2, 1992, now abandoned, which is a continuation-in-part of application Ser. No. 07/844,967 filed Feb. 28, 1992, now abandoned, which is a continuation of Ser. No. 07/292,598 filed Dec. 30, 1988 now abandoned.

“A method and apparatus for quantizing audio signals is disclosed which advantageously produces a quantized audio signal which can be encoded within an acceptable range. Advantageously, the quantizer uses a scale factor which is interpolated between a threshold based on the calculated threshold of hearing at a given frequency and the absolute threshold of hearing at the same frequency.”

Those are the two patents for which a jury just awarded Alcatel-Lucent $1.5 billion. Not bad considering that Alcatel paid only about $11.5 billion for the entire company Lucent – and that was merely a stock deal, no cash at all. If Alcatel gets similar judgments on its other patent suits, its purchase will have been a STEAL, and we do emphasize the world steal. Lots of money flowing out of America into Parisian coffers.

At the same time, Alcatel-Lucent plans to cut 12500 jobs worldwide (12% in France) – which means more unemployed on the streets and more money for execs ….”

In the just issued Federal Circuit decision as written by Circuit Judge Prost:

This case involves alleged infringement by Gateway, Inc. (“Gateway”), Microsoft Corporation (“Microsoft”), and Dell Inc. (“Dell”) of two patents owned by Lucent Technologies, Inc. (“Lucent”). After a jury verdict of infringement and a damages award of $1,538,056,702, the district court granted judgment as a matter of law (“JMOL”), and alternatively a new trial, on infringement and damages. Lucent Techs., Inc. v. Gateway, Inc., 509 F. Supp. 2d 912 (S.D. Cal. 2007) (“Lucent”). For the reasons set forth below, we affirm the court’s grant of JMOL based on lack of standing for one patent and based on non-infringement for the other patent. We need not decide the damages issues.


The patents at issue in this appeal are directed to methods of compressing digital audio files to reduce storage space without compromising the quality of sound produced from the files. The methods involve using the frequencies of the audio signals to generate frequency coefficients, and then using certain thresholds—which dictate what data can be ignored and how finely to encode the data—to assign numbers to the audio signals, i.e., to “quantize” the frequency information. For example, an “absolute hearing threshold” is an estimate of the quietest sounds a person can hear. A “masking threshold” reflects what sounds are inaudible when other sounds are present.

Read the rest here.

Slowly, sanity is returning to patent law. Hat tip to Patently-O.

Next in line for reform are the nation’s financial institutions, where prudence and good judgment have to be brought to bear again on banking, real estate, and financial services, to replace the disastrous “gold digger” and “windfall of riches” mentality that has taken control in financial circles in recent years, and which pervades the land.