Yesterday, a jury ruled that Microsoft was liable for $1.52 billion in damages for infringing on Alcatel-Lucent’s MP3 patent. Turns out that Microsoft licensed the technology from the wrong company. As the Washington Post explains:
Alcatel-Lucent argued that it held the rights to the technology because it was developed at Bell Laboratories, which later became part of Lucent. Alcatel bought Lucent last year. The company successfully argued that Microsoft infringed on the patents by including the digital music technology in its Windows operating system starting in 1998. The same technology later was used in Microsoft’s Windows Media Player and is included in the Windows Vista operating system, which was released to the public last month.
Microsoft countered that it had properly licensed the technology from Germany’s Fraunhofer Institute, which was involved with Bell Labs in developing aspects of the MP3 format. Only after Microsoft and other companies made licensing agreements with Fraunhofer did Alcatel-Lucent raise its claim, Microsoft argued.
The jury said “wrong” and awarded the damages to Alcatel-Lucent.
That decision may have huge implications for the digital music industry. The Post story goes on:
About 400 companies have similar licensing agreements with Fraunhofer, according to Thomson Technology, a San Diego company that identifies itself as the “licensing representative of MP3 patents and software of the Fraunhofer Institute.” Those companies include Apple, Creative Technology, Real Networks, Palm and Samsung.
To me, this raises a fundamental question about the patent system. If the electronics industry can’t figure out who owns a basic patent (and whom they should be licensing it from), then how can there be any innovation? I don’t know all the details of this patent or the licensing history. But how can Microsoft and 400 other companies simply guess wrong about who owned the patent?
Something is seriously wrong here.