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Court Rules For Dolby Labs In AC-3 Dispute With Lucent

4/27/2005 09:16:00 AM Eastern

San Jose, Calif. –The U.S. District Court here ruled that Dolby Labs’s AC-3 surround-sound technology does not infringe on two Lucent Technology patents, sparing Dolby from paying unspecified damages and allowing it to continue marketing the technology.

Lucent has not decided whether to appeal. “We are studying the decision," Lucent spokesman John Skalko said. Meantime, Dolby is pursuing a suit against Lucent to declare that the two Lucent patents are invalid.

The court case between the two began in May 2001 when Dolby filed suit against Lucent seeking to declare the Lucent patents invalid. Lucent failed twice to have the complaint dismissed, Dolby said, and in August 2002, Lucent filed its counterclaim.

When it went public earlier this year, Dolby’s prospectus warned that the lawsuit filed by Lucent against Dolby Labs “could materially impact” Dolby’s licensing business and “may seriously harm our financial condition and results operations.”

In the prospectus, Dolby said its technology licensing business accounted for $211.4 million of its $289 million in total 2004 fiscal revenue, “principally as a result of the increase in sales of DVD players and in-home theater systems that incorporate our surround sound technologies [AC-3, or Dolby Digital].” The company continued, “Our licensing revenue is primarily dependent on our licensees’ sales of DVD players, audio/video receivers, and home theater systems.”

Dolby’s claims against Lucent go to trial Sept. 9.