The US Court of Appeals on Friday affirmed a decision by a lower court which had ruled that Microsoft had infringed on a patent owned by Alcatel-Lucent. The Federal Court however provided some relief to Microsoft as it termed that the damage amount of $ 358 million ruled by the lower court was excessive. It sent back the damage ruling back to the lower court.

The case pertains to a dispute involving Microsoft and Alcatel-Lucent. The patent application was originally filed by AT&T engineers. The engineers had developed a method of entering information into fields on a computer screen. The unique feature was that this was made possible without the needs for a keyboard. Subsequently Lucent sued Gateway for alleged infringement in 2002. Microsoft intervened later on. Dell is also a defendant in the case.

The use of the application was found to be made in Microsoft Outlook, Microsoft Money and Windows Mobile. Alcatel-Lucent cited that it should be awarded up to 8 % of revenues from Microsoft. Microsoft had asked for a $ 6.5 million damage fee.

In short, Outlook is an enormously complex software program comprising hundreds, if not thousands or even more, features. We find it inconceivable to conclude, based on the present record, that the use of one small feature, the date-picker, constitutes a substantial portion of the value of Outlook," the court said.

"We are pleased that the court vacated the damages award, and we look forward to taking the next step in the judicial process," Microsoft spokesman Kevin Kutz said in a statement.

"We are very pleased with this decision by the US Court of Appeals for the Federal Circuit affirming the jury's decision that Microsoft infringed the Alcatel-Lucent Day patent and that the Day patent is a valid patent," Alcatel-Lucent spokeswoman Mary Ward said in a statement.

"While we are disappointed that the court did not affirm the jury's decision on damages, we look forward to an upcoming proceeding to determine the compensation to which Alcatel-Lucent is entitled based on the court's finding that Microsoft did use our patented invention, which Microsoft included in each of the infringing products, presumably because they recognised that it added real value for their customers," she said.

The two companies are similarly involved in other patent infringement cases as well including for MP3 format, communications technology and digital speech compression.