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Updated 1:40 p.m. PDT, with comment from Alcatel-Lucent.
A federal appeals court has upheld a lower court ruling that Microsoft need not pay damages to Alcatel-Lucent in a long-running patent dispute in a case that could have opened up a broad range of litigation over the MP3 music format.
The appeals court, in its ruling published Thursday, agreed with a lower court that Microsoft didn't infringe on one patent in question and that Alcatel-Lucent didn't have standing to sue over the other patent.
Microsoft was initially hit with a $1.5 billion verdict in the case

District Judge Michael Davis on Wednesday granted Jammie Thomas' motion for a new trial in the case, brought by the Recording Industry Association of America that alleged she illegally downloaded copywritten material off the peer to peer site Kazaa.
Additionally, the judge urged Congress to redefine the definition of peer-to-peer piracy and prevent exorbitant fines to be levied against other defendants in similar situations, according to his ruling.
Thomas was initially found guilty of downloading 24 songs and ordered her ordered to pay $222,000 to six record companies. That equates to $9,250 per downloaded song. With the order of the new trial, Davis declined to rule on the fine, instead deferring that decision to the next round of litigation.
Davis's declared the mistrial because he said he believes he misled the jury in the initial court case when he told the jury that sharing music was the same as distributing it.
In Jury Instruction 15, he instructed the jury that, 'The act of making copyrighted sound recordings available for electronic distribution on a peertopeer network, without license from the copyright owners, violates the copyright owners' exclusive right of distribution, regardless of whether actual distribution has been shown.'
On May 15, Davis first announced he was considering granting a new trial because the Court may have 'committed a manifest error of law in giving Jury Instruction No. 15.'
Davis then heard oral arguments from attorneys on both sides, with Thomas's attorney arguing that if Jury Instruction No. 15 was, indeed, an error, a new trial should be granted to avoid a miscarriage of justice. After hearing arguments from each side, Judge Davis eventually ruled that he erred in issuing the instruction and arguments were heard about the definition of the word 'distribution.'
The court eventually concluded that if 'simply making a copyrighted work available to the public constituted a distribution, even if no member of the public ever accessed that work, copyright owners would be able to make an end run around the standards for assessing contributor copyright infringement.'
Finally, Judge Davis ruled in favor of a new trial.
'Jury Instruction No

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