Lucent sues Microsoft, Microsoft sues back... Is litigation over old Bell Labs patents a wise choice?

April 11, 2003

3 Min Read
Lucent/Microsoft Battle Brews

As if it didn't have enough to keep itself busy, Lucent Technologies Inc. (NYSE: LU) has picked a fight with two PC makers in an attempt to defend several patents granted to technologies first developed at Bell Labs. And now Microsoft Corp. (Nasdaq: MSFT) has decided to take up for its customers by filing a suit that seeks to render Lucent's patents invalid and unenforceable.

The confusing and curious series of lawsuits started last fall when Lucent sued PC maker Gateway Inc. for allegedly making use of specific technologies without licensing them from Bell Labs. Months later, Lucent sued Dell Computer Corp. (Nasdaq: DELL) for pretty much the same thing. The patents in question relate to audio coding, telephony, video display, networking, user interface, and other technologies associated with Gateway's and Dell's computer systems.

If you want to geek out, the technologies include:

Though Microsoft is just now suing Lucent, it officially became involved as early as February, when it began to intervene on Gateway's behalf. And though Lucent only sued Gateway last year, several of its patents had their origin (like mullets) in the early 80s.

Lucent spokesman John Skalko explains that since it spun off from AT&T in 1996, it has sought to defend its intellectual property. And, even though some of the patents in question have expired, Lucent says it notified Gateway and Dell before time ran out. "We are asking for fair and reasonable compensation for use of our intellectual property," he says.

Why does Microsoft care? In one court document, Microsoft said it interprets both the Gateway and Dell lawsuits as having come, at least in part, from the use of its software in their PCs. It's also likely that Microsoft is bound by indemnity clauses that obligate it to protect its customers should they ever get in trouble selling its technology.

The bad news for Lucent is that its sparring with PC makers ended up threatening Microsoft, which has formidable legal resources, to say the least. In recent months, Lucent has settled its legal matters relatively quickly so as to avoid further distraction for a company that is working hard to mend its public image and shareholder confidence (see Lucent Pays Big to Settle Claims and Lucent to Settle With SEC). This one, however, may take a while, as the damages could soar into the millions of dollars -- and court documents show the company has demanded a jury trial.

— Phil Harvey, Senior Editor, Light Reading

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