Microsoft has been hit with a $1.52bn patent infringement award, one of the biggest on record, in a case that it warned would have sweeping implications for many technology companies involved in digital music.
The award was won on Thursday by Alcatel-Lucent after a jury in a US district court in San Diego agreed with its claim that the software giant had infringed two of its patents.
The dispute surrounded Microsoft's use of MP3 technology, a format for encoding and compressing digital music so that it can be transmitted over the internet.
Tom Burt, Microsoft's deputy general counsel, rejected the verdict as "completely unsupported by the law or the facts", and predicted the ruling would have implications for "hundreds of other companies who have licensed MP3 technology".
An Alcatel-Lucent spokesperson said there were no other lawsuits outstanding over the technology.
Alcatel-Lucent investors in Paris welcomed the ruling, sending the group's share price 2.5 per cent higher to €10.08 in mid-morning trading on Friday.
The large size of the award highlights the scale of the risk to Microsoft as it faces a series of other wide-ranging legal disputes with Alcatel-Lucent over some of the fundamental technology used in PCs and related devices.
Thursday's verdict, stemming from the use of audio coding technology in PCs, was the first of five due to be heard by the San Diego court in the coming months. The others relate to speech coding technology in Windows; user interface patents; technology in the Xbox games console; and video coding in other Microsoft software.
Given Microsoft's dominance of the desktop computing market, the potential losses are considerable. Thursday's award was calculated based on the number of Windows operating systems sold since May 2003, multiplied by the average selling price of a range of PCs.
Microsoft argued that it had licensed the necessary technology to use the MP3 format in its software from Fraunhofer Society, a German research concern, which was involved in the development of the format.
It paid just $16m for the privilege, but Mr Burt claimed it was "the industry-recognised rightful licensor".