Alcatel vowed appeal. "This reversal of the judge’s own pretrial and post-trial rulings is shocking and disturbing, especially since — after a three-week trial and four days of careful deliberation — the jury unanimously agreed with us. We still have a strong case, and we believe we will prevail on appeal."

Brad Smith of Microsoft gloated, hailing the ruling as "a victory for consumers of digital music and a triumph for common sense in the patent system."

Microsoft had contended that it had already licensed, for $16 million, the requisite technology from a Munich-based research institute, Fraunhofer-Gesellschaft. Judge Brewster bought that argument, finding that Fraunhofer was a co-owner of the '080 patent, thus Lucent did not have standing to sue. Because Microsoft has a license for the technology, it cannot be sued for infringement.

The '457 infringement jury finding was overturned because only somewhat speculative evidence had been provided of infringement, Judge Brewster determined, thus Lucent had failed "failed to meet its burden to demonstrate by a preponderance of the evidence, direct or circumstantial."

The $1.5 billion tab had been concocted from a 0.5% of average sales price of any infringing computer worldwide running Windows. It was the largest patent award in U.S. history, and indubitably whittled down on appeal if it had been upheld, in light of the Supreme Court ruling in AT&T v. Microsoft case over limiting damages for international software sales. Brewster denied Microsoft's motion for JMOL on royalty assessment, but granted a new trial.

Paris-based Alcatel has been hyper-assertive since acquiring Lucent, bringing suits against everyone it could, often for patents granted to Bell Labs, the progenitor of Lucent. As a business, Lucent was running itself into the ground prior to acquisition, but its patent portfolio was shiny. Alcatel has had some success licensing from that portfolio without knock-down, drag-out fights.

Microsoft and Alcatel are battling each other over other patents. Both are notoriously tough-minded; grinding on is much more likely than settlement.