A US district court has overturned a decision ordering Microsoft to pay phone firm Alcatel-Lucent $1.52bn (£777m) for infringing music patents.
Alcatel and Microsoft are involved in a number of legal battles
The federal judge in San Diego reversed a jury's decision which had ruled that Microsoft's Media Player software infringed on two Alcatel patents.
Both patents regarded how audio was converted into MP3 files.
Alcatel said it would appeal against the decision while Microsoft said the reversal was a "victory for consumers".
Mary Lou Ambrus, a spokesperson for Alcatel-Lucent, said: "This reversal of the judge's own pre-trial and post-trial rulings is shocking and disturbing."
Microsoft said the verdict was good for consumers
Judge Rudi Brewster ruled that Microsoft had not breached patent laws because Microsoft had already paid German firm Fraunhofer $16m to use one of the patents in question.
Given that Fraunhofer had not sued, Microsoft was not deemed to have broken any laws, the judge decided.
In reversing the decision, the judge also rejected the argument given to justify the fine - that it amounted to 0.5% of Microsoft's global personal computer sales since 2003.
If the French firm were successful in challenging the ruling, he would give them a new trial, but he would not reinstate the original $1.5bn fine.
There had been fears that if Microsoft had lost the Alcatel-Lucent case, many other firms that license technology would also be sued.
The case in the San Diego court is just one of six cases brought by Alcatel-Lucent that the court is set to hear.
They are all against computer firms and include Dell and Gateway.