Microsoft’s latest legal battle has resulted in the biggest patent payout in history. The software giant was ruled on Thursday to pay out Alcatel-lucent $1.54B for infringement of the MP3 coding software that was developed with people from Germany's Fraunhofer and AT&T's Bell Labs, which became part of Lucent when it was spun off in 1996. Alcatel and Lucent merged last year, becoming Alcatel-Lucent.

The fine given to Microsoft was the largest payout ever given to a patent case. The figure was calculated on the number of Microsoft products sold from May 2003 that included the patented software. However Patent cases have been known for reversals, so there is still hope for Microsoft appeal.

With this ruling it is probable that Alcatel-Lucent will go after other manufactures using the MP3 coding without consent. There are hundreds of Companies that use the MP3 encoding software and hardware some of the major companies include Apple ITunes, Yahoo! with Yahoo! Music online, chipmakers such as Intel and Texas Instruments.

We think this verdict is completely unsupported by the law or the facts," Microsoft lawyer Tom Burt Said in a statement. Microsoft has asked the judge for relief, which may end up as an appeal, but we’ll have to wait a week or so for the judge to get back from vacation next week to hear the result.

Microsoft have incorporated MP3 encoding and decoding into all versions of the new operating system Vista, so if the finding could affect the heart of business for the software giant.

There have already been fifteen claims against the two computer resellers, Dell Inc. and Gateway Inc. Two of the fifteen claims against Dell Inc. and Gateway Inc. to which Microsoft added itself as a defendant, where thrown out, with 6 additional hearings to hear the following thirteen.