A US federal court in San Diego made a possible landmark ruling regarding the use of the MP3 format last week as part of a long running and wide ranging legal dispute between Alcatel-Lucent and Microsoft.
The dispute centres on who has the right to licence MP3 technologies, which are used in some way by most major computing firms, even those who, like Microsoft, own their own competing audio formats. The main group to own patents for MP3 technologies is the German based research organisation the Fraunhofer Society, which licences the use of those patents via a French company called Thomson.
However, another French firm, Alcatel, now part of Alcatel-Lucent, also claims ownership of some MP3 related patents, and to that effect began legal proceedings against PC makers Dell and Gateway in 2003, because the Microsoft audio systems installed on their machines used MP3 technologies. Microsoft stepped into that legal action on behalf of their b2b customers, and so a long running legal fight began, taking in other dimensions along the way, including a countersuit from Microsoft.
But last week the court in San Diego basically ruled in favour of Alcatel, convinced the French firm was correct to say Microsoft had infringed their MP3 patents in its audio software, even though they had correctly licensed other MP3 patents off the Fraunhofer Society. Microsoft was ordered to pay a whopping $1.5 billion in compensation to Alcatel, based on every Windows based PC that has been sold around the world since May 2003 (it should be said that that compensation payment isn't quite so mind blowing in the context of a multi-national conglom like Microsoft - though it is still significant - it may as yet be reduced because a separate court case is disputing the right of the US courts to order compensation for patent violations outside America).
A representative for Alcatel-Lucent welcomed the ruling, telling reporters: "We made strong arguments supporting our view, and we're pleased with the court's decision". Needless to say, Microsoft were less happy. They said the verdict was "completely unsupported by the law or the facts" and vowed to fight the ruling and, if necessary, appeal the judgment.
Other IT firms who use the MP3 format have been watching the case closely, and will continue to do so as Microsoft appeal, because many of them also only licence MP3 technologies from Fraunhofer and could, in theory, now face expensive lawsuits from Alcatel. It was with that in mind that Microsoft's Deputy General Counsel Tom Burt said last week: "Today's outcome is disappointing for us and for the hundreds of other companies who have licensed MP3 technology. 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".