The $200 million verdict is the second-largest patent jury award this year, the largest of all–coincidentally, I’m sure–being the $388 million verdict against Microsoft won by Singapore’s Uniloc in April over an infringement of its security technology. Then, as in the i4i case and most other patent rulings that haven’t gone its way, Redmond responded with incredulity, claiming it couldn’t have possibly infringed on the patent because the patent is invalid. “We believe the evidence clearly demonstrated that we do not infringe and that the i4i patent is invalid,” said David Bowermaster, a Microsoft spokesman, in the company’s now boilerplate statement on such matters. “We believe this award of damages is legally and factually unsupported, so we will ask the court to overturn the verdict.”

At issue here was whether the sale of digital music downloads falls under the “distribution” agreements that cover physical releases like CDs. FBT argued they do not, claiming that the label incurs none of the costs typically associated with them–things like CD jewel cases and inserts, breakage fees and in-store displays. Instead, the production company said that downloads should be covered by “licensing” agreements that don’t include such expenses. And the difference between the two is significant: Under distribution deals, artists typically take a 30 percent split of royalties earned. Under licensing deals, they take 50 percent.

But the jury didn’t quite see things FBT’s way and instead bought Universal’s argument that the economics for digital downloads should be viewed as similar to those of the single. A nasty blow to FBT and other artists hoping to see their royalty rates adjusted to account for the new economies of distribution provided by digital music storefronts. Seems that much as technology has changed the relationship between musicians and their fans, it’s done little to change the one between musicians and their labels.

Something like X times Y, to the power of Z–where X is the lack of a sustainable business model, Y is an aggravated response to a nonexistent threat, and Z is the inability to differentiate between customers and thieves.”

–Toronto Globe and Mail writer Mathew Ingram explains the formula used to calculate damages in Virgin Records America et al. v. Thomas.

We’re never going to hear the end of it now …

The recording industry won its first ever file-sharing suit to go to trial yesterday, when a federal jury found 30-year-old Jammie Thomas liable for copyright infringement. The jury awarded the six record labels involved in the case a total of $220,000, or $9,250 for each of the 24 songs they claimed Thomas uploaded.

Seems it was far easier for the labels to sell the jury on their investigative methods than you might think–especially after the presiding judge ruled that no proof was needed that anyone actually downloaded the songs at issue in the case–simply making them available constituted distribution.

Emboldened by the ruling, the Recording Industry Association of America took a break from sending prelitigation settlement letters to college students to issue this gloating statement: “The law here is clear, as are the consequences for breaking it. When the evidence is clear, we will continue to bring legal actions against those individuals who have broken the law. This program is important to securing a level playing field for legal online music services.”

Reading that you’d never think it’s been eight years since Napster, would you? Eight years. Anyway …

Attorney Ray Beckerman, writing in the Recording Industry Vs. the People blog, called the verdict “one of the most irrational things” he’s ever seen in law. “A verdict of $222,000, for infringement of 24 song files worth a total of $23.76?” he asked. “In a case where there was zero evidence of the defendant having transferred any of those files? It is an outrage, and I hope it is a wakeup call to the world that we all need to start supporting the defendants in these cases, and the attorneys who are sacrificing so much to represent them. And the support cannot be with words, it must be with checkbooks. And it cannot be next year, it must be now.

“All the businesspeople who make a living from the vibrancy, democracy and freedom of expression which is the Internet need to get behind the RIAA’s victims; if they do not, the world in which they hope to thrive and prosper will disappear rapidly.

“The RIAA ghouls smelled blood in Duluth, and I guess they were right.”

Finding that a jury’s decision was “against the clear weight of the evidence,” a federal judge yesterday overturned the February verdict that found Microsoft to have infringed upon two of Alcatel-Lucent’s digital music patents. The judge ruled that it doesn’t hold the rights to one disputed patent and hadn’t proved that Microsoft’s programs were using the technology in the other.

The decision is quite a win for Microsoft, which licensed the technology at issue in the case from its rightful licenser–German firm Fraunhofer–and was understandably a bit incredulous when Alcatel-Lucent sued it and won. “Today’s ruling by the judge reversing the jury’s $1.52 billion verdict against Microsoft is a victory for consumers of digital music and a triumph for common sense in the patent system,” Microsoft said in a statement. “For the hundreds of companies large and small that rely on MP3 technology, the Court’s ruling clarifies that these companies have properly licensed the technology embodied in the ‘080 patent from its co-owner and industry recognized MP3 licenser–Fraunhofer.”

For Alcatel-Lucent, of course, it’s a different story entirely. It’s lost not just the $1.52 billion jury verdict, but the supplemental damages and prejudgment and postjudgment interest it was suing Microsoft for as well. “The reversal of the judge’s own pretrial and posttrial rulings is shocking and disturbing,” said Alcatel-Lucent spokeswoman Mary Ward, who noted the company plans to appeal. “The jury unanimously agreed with us. We believe their decision should stand.”