Feb. 23 (Bloomberg) -- Shares of Alcatel-Lucent rose 2.6 percent after a U.S. federal jury ruled that Microsoft Corp. must pay the French company $1.52 billion for using digital music technology without permission.

The shares rose 26 cents to close at 10.09 euros in Paris, giving Alcatel-Lucent, the world's largest maker of telecommunications equipment, a market value of 23.3 billion euros ($30.7 billion).

Microsoft, the world's largest software maker, infringed two patents of Paris-based Alcatel-Lucent with its Windows Media Player, including the version in the new Vista operating system, a San Diego jury said yesterday. Microsoft said it will appeal the verdict.

``The jury's decision, if confirmed, would open the way for Alcatel-Lucent to file a large number of lawsuits against other companies using these patents illegally,'' analysts Frank Maccary and Eric Beaudet at Ixis Securities wrote in a note.

One of the disputed patents relates to compression of digital audio signals, while the other describes how to encode and play digital music. The jury upheld the validity of the patents and found that Alcatel-Lucent is entitled to more than $759 million for each of the two infringed patents.

Fraunhofer Technology

Redmond, Washington-based Microsoft said it licenses technology from a German researcher, Fraunhofer Institute for Integrated Circuits IIS. Fraunhofer helped develop MP3 audio- compression technology with Bell Labs, once part of Lucent Technologies Inc., which Alcatel SA acquired last year.

The decision allows Alcatel-Lucent to seek an order barring Microsoft from using the patented technology. The victory may clear the way for legal actions against hundreds of companies that rely on MP3, the standard for playing music and sound files on mobile phones and digital-music players.

``At this stage, the ruling is just a recommendation and Microsoft can still request that it be cancelled, or lodge an appeal,'' Maccary and Beaudet said in their research note.

The dispute started when Lucent accused computer makers Gateway Inc. and Dell Inc. of infringing a number of patents. Microsoft joined the case because it may be obligated to reimburse Dell and Gateway for any damages they have to pay. The overall case was split based on technology, and this trial over MP3 was between only Microsoft and Alcatel-Lucent.

``Obviously that's going to be appealed as high as it can be appealed,'' Brian Ferguson, a patent lawyer at McDermott Will & Emery in Washington who wasn't involved in the case, said yesterday.

Further Review

Microsoft, which had almost $29 billion in cash and short- term investments as of Dec. 31, said it will ask U.S. District Judge Rudi M. Brewster to overturn the verdict and will seek further review in an appeals court if necessary.

Microsoft is currently fighting other jury verdicts it lost over features within Windows, including a $521 million verdict in favor of a Chicago man over the Explorer Internet browser and $142 million to a Michigan man over authentication codes to cut down on piracy.

Alcatel-Lucent will decide later whether to seek to block Microsoft from using the technology, said Alcatel-Lucent lawyer John Desmarais of Kirkland & Ellis in New York yesterday.

``A check in the mail is great but we think that the whole ordeal has strained the relationship between the two companies,'' analyst Mark Sue at RBC Capital Markets wrote in a note. ``Competitors such as Cisco and Ericsson may potentially take advantage of this rift.''

Damage Award

A witness for Alcatel-Lucent testified during the trial that $1.52 billion would be reasonable compensation for Microsoft's use of the technology without permission. That figure was based on a 0.5 percent royalty on the hundreds of millions of computers sold worldwide that contain the Windows operating system, not the Windows software itself.

The damage award may be halved if Microsoft wins an unrelated case before the U.S. Supreme Court that could alter how patent damages are calculated for software companies with overseas sales. Arguments in that case were held in Washington this week.

The issue of whether software makers such as Microsoft should pay damages for programs installed on computers made and sold outside the U.S. was the subject of U.S. Supreme Court arguments on Feb. 22.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

Last Updated: February 23, 2007 12:02 EST