Sept. 25 (Bloomberg) -- Microsoft Corp. convinced a federal appeals court that it shouldn't have to pay $1.5 billion in damages to Alcatel-Lucent SA, after a lower court threw out the jury's record verdict over the MP3 digital-music standard.

The U.S. Court of Appeals for the Federal Circuit today affirmed the lower court's decision that one of the two patents wasn't infringed and that Microsoft, the world's biggest software maker, had a valid license for the second one.

In February 2007, a San Diego jury ruled that Microsoft's Windows Media Player infringed Lucent patents and awarded the damages. U.S. District Judge Rudi Brewster threw out the verdict in August 2007.

Alcatel-Lucent, based in Paris, is reviewing its options, spokeswoman Mary Ward said in an e-mailed statement. ``It is too early to speculate on what our next steps might be.''

The MP3 format is used to play music and sound files on computers, mobile phones and digital-music players.

Alcatel-Lucent rose 8 cents to 3.06 euros in Paris trading. The stock has dropped 38 percent this year. The company's American depositary receipts, each representing one share, fell 4 cents to $4.40 in New York Stock Exchange composite trading. Microsoft rose 89 cents to $26.61 today in Nasdaq Stock Market trading.

The ruling is ``a victory for consumers of digital music and a triumph for common sense in the patent system,'' Tom Burt, deputy general counsel for Redmond, Washington-based Microsoft, said in an e-mailed statement.

Patent Cases

Alcatel-Lucent, formed in 2006 after Alcatel bought Lucent Technologies Inc., claimed Brewster erred in throwing out the verdict. Brewster said in August 2007 that one Alcatel-Lucent patent wasn't infringed and the second was co-owned by a German research institute that licensed the invention to Microsoft.

Joint ownership with the Fraunhofer Institute was intended, giving Microsoft the right to license the technology, Microsoft's attorneys had argued before the appeals court in July.

The two companies have been sparring in California courts for the past two years. In April, Microsoft was ordered to pay $368 million to Alcatel-Lucent over infringement of patents for touch-screen form entry and use of a stylus.

In a separate trial between the two companies, Microsoft on June 4 defeated Alcatel-Lucent's bid for $419 million in damages.

The cases are Lucent Technologies Inc. v. Gateway Inc., 07- 1546, 07-1580, U.S. Court of Appeals for the Federal Circuit (Washington).

To contact the reporters on this story: William McQuillen in Washington at bmcquillen@bloomberg.net.

Last Updated: September 25, 2008 16:19 EDT