A US court has ordered Microsoft to pay Alcatel-Lucent $1.5bn as compensation for including the company's MP3 tech within Windows.
The French company's technology is used for the conversion of MP3 files in the operating system. Microsoft says it did pay for the rights.
"Like hundreds of other companies large and small, we believe that we properly licensed the MP3 technology from its industry recognised licensor - Fraunhofer," said corporate vice president and deputy general counsel Tom Burt.
Microsoft is willing to continue the fight. "We think this verdict is completely unsupported by the law or the facts. We will seek relief from the trial court, and if necessary appeal," continued Burt.
"The damages award seems particularly outrageous when you consider we paid Fraunhofer only $16 million to license this technology."
Microsoft says the outcome of the case isn't just bad for them, but for the "hundreds of other companies who have licensed MP3 technology" as well.
"We are concerned that this decision opens the door for Alcatel-Lucent to pursue action against hundreds of other companies who purchased the rights to use MP3 technology from Fraunhofer, the industry-recognised rightful licensor."
If the ruling is upheld at appeal, the case could be costly for Microsoft, but it could also open the floodgates for Alcatel-Lucent. The ruling against Microsoft is part of ongoing litigation between the two companies - Microsoft says it is "pursuing a number of patent claims against Alcatel-Lucent".
Alcatel and Lucent merged last year. The lawsuit came from the Lucent side of the business; a bitter pill for Microsoft to swallow since Alcatel was an ally - it had signed an IPTV deal with Microsoft in 2005.