Microsoft must pay French phone equipment firm Alcatel-Lucent $1.52bn (£777m) after a US court ruled the IT giant had infringed audio patents.
Alcatel and Microsoft are involved in a number of legal battles
Alcatel had sued Microsoft, saying two patents related to the standards used for converting audio into MP3 files had been breached.
Microsoft said it may appeal against the federal jury's decision, saying it was "unsupported by the law or facts".
Alcatel said it was pleased with the San Diego court's decision.
"We made strong arguments supporting our view " said an Alcatel-Lucent spokeswoman.
Microsoft said it had already licensed the MP3 technology, paying $16m to a German firm Fraunhofer.
"We are concerned that this decision opens the door for Alcatel-Lucent to pursue action against hundreds of other companies who purchased the rights to use MP3 technology from Fraunhofer, the industry-recognized rightful licensor," said Microsoft lawyer Tom Burt.
There are a number of long-running patent disputes between Microsoft and US-based Lucent Technologies which Alcatel is taking over - with a further five set to go to court.