Yesterday Microsoft was ordered by the Federal District Court in San Diego jury to pay $1.52 billion in a patent dispute over the MP3 format. The format is the technology at the heart of the boom in digital music and if upheld on appeal, the verdict would be the largest patent judgment on record. The ruling, in, was a victory for Alcatel-Lucent, whose acquisitions include Bell Laboratories, which was involved in the development of MP3 almost two decades ago.
MP3 was developed by a consortium which included the Fraunhofer Institute, a large German research organization, the French electronics company Thomson and Bell Labs. Microsoft and others have licensed MP3 from the consortium. The current case turns on two patents that Alcatel claims were developed by Bell Labs before it joined with Fraunhofer to develop MP3.
At issue is the way the Windows Media Player software from Microsoft plays audio files using MP3, the most common method of distributing music on the Internet. If the ruling stands, and hundreds of other companies that make products that play MP3 files, including Apple, portable players, computers and software, could also face demands to pay royalties to Alcatel.
Other patent trials are pending for technology related to speech recognition, user interfaces and video processing and the world of patents just got a lot messier. The previous largest award for a patent infringement case was in 1990, when Kodak was ordered to pay $909 million to Polaroid for violating patents related to instant cameras. That case also forced Kodak to exit the instant photography market and recall its cameras.
The MP3 appeals process is likely to take years to resolve and in the meantime it is not expected that the courts will force Microsoft to remove the MP3 functions from Windows.
