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Dolby, Lucent In AC-3 Dispute

A patent-infringement lawsuit filed by Lucent against Dolby Labs “could materially impact” Dolby’s licensing business and “may seriously harm our financial condition and results operations,” Dolby said in its prospectus.

In August 2002, Lucent filed a suit claiming that products incorporating Dolby AC-3 technology infringe on two Lucent patents and sought injunctive relief and unspecified damages, the prospectus says.

In the prospectus, Dolby says 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.”

For the 2004 fiscal year ending last September, Dolby generated a net income of $39.8 million.

The suit goes to a jury in April in San Jose, Calif.