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More Patent Pain

Alcatel-Lucent won the tort lottery yesterday when a federal jury in San Diego ordered Microsoft to pay it $1.52 billion. The jury found that the MP3 software in Microsoft's Windows Media Player program violated two Alcatel-Lucent patents that describe ways to store music as compressed digital files.

Microsoft can't be happy about this (the company says it will appeal, calling both the verdict and the penalty unjustified). But you shouldn't be either. Alcatel-Lucent's patent payday has all the things that patent-abuse critics hate:

* "Submarine" patents, invoked years after a contested invention has hit the market? Check
* Claiming ownership of a media format most people use all the time? Check
* A plaintiff that's failed to commercialize its own alleged invention? Check
* Extortionate royalty demands? Check

But wait--there's more!

The bizarre thing about the Alcatel-Lucent verdict is that Microsoft, along with every other company to make commercial use of the MP3 format, has already been paying licensing fees for it. Microsoft has shelled out $16 million to date to the creators of the MP3 format (principally the Fraunhofer-Institut für Integrierte Schaltungen IIS, a German research center).

Has everybody been writing checks to the wrong company? Or is Alcatel-Lucent incorrectly claiming ownership of the Fraunhofer work? What gives?

You can read the two Alcatel-Lucent patents--one issued to Lucent in 2006, the other granted to Lucent ancestor Bell Labs in 1994--at the U.S. Patent and Trademark Office's Web site, but good luck making any sense out of their technical details. And, annoyingly enough, Alcatel-Lucent's site says nothing about the case. (Way to try to win the war of ideas, people.)

So here we have a company that did the right thing and still got whacked, to the tune of $1.52 billion. I have a real problem with a legal system that defies the attempts of well-meaning people to stay on the right side of the law.

Then consider this: With Microsoft as a defendant you've got the best-case scenario--the company can afford to hire hundreds of lawyers to fight this. Most companies will just pay up; it can be cheaper to accept somebody's licensing demands, however unfounded they may be, than to slug it out in court.

I'd feel different about this if Alcatel-Lucent were not so obviously greedy. Forget $1.52 billion; the company says it wants $4.56 billion! I also have a sick feeling that its next step will be a suit claiming that these patents also cover other music formats.

(I forgive any European readers who feel a little smug about all this; the European Union's parliament had the good sense to vote against allowing software patents in 2005.)

Yes, inventors have a right to profit from their creativity. But we also need to look at how things play out in society at large. It says so right in the Constitution (emphasis added):

The Congress shall have Power.... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

Does the current patent system promote the progress of science and useful arts, or does it promote the padding of lawyers' bank accounts? Does it reward innovative product design or innovative legal strategies?

More from me on this: A 2001 column attacking patent trolling by British Telecom and CMGi, and a 2006 piece on BlackBerry maker Research In Motion's role as both plaintiff and defendant in patent litigation.

By Rob Pegoraro  |  February 23, 2007; 2:52 PM ET
Categories:  The business we have chosen  
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you say: "I have a real problem with a legal system that defies the attempts of well-meaning people to stay on the right side of the law. about copyright? as you surely know, there is NO PRACTICAL WAY to determine the copyright status or current copyright owner of the bulk of the works published after 1922.

i agree with your assertion but you must look at the entire intellectual "property" field. a copyright or a patent is a monopoly and they should be disfavored in situations where the work is no longer in print or the invention is not being incorporated into readily available products.

Posted by: allen dyer | February 23, 2007 8:05 PM | Report abuse

You say "Yes, inventors have a right to profit from their creativity" but that wasn't specifically the purpose of the patent system, which was thought to be a necessary limited duration protection for some types of creativity. Most software and business-method "inventions" would have been created without such protection.

So why are we issuing patents for them? Just to be good-hearted, but misguided, since these hopelessly interfere in creativity? How is the author of a million line product supposed to recognize a patented technology? Thirty years ago only software copyright was available, and that is comparatively easy to check. Let's dump these types of patents - laws are supposed to collectively make society better off - this one does the opposite.

Posted by: Ken Belcher | February 23, 2007 8:20 PM | Report abuse

Don't you think that the fact that Microsoft can afford the best lawyers to defend itself, and that they were still found guilty of patent infringement AND were not able to invalidate the patent suggests that Microsoft DID infringe the patent and that it IS valid?

Don't throw the baby out with the bathwater. The fact that you (or I) may disagree with this outcome doesn't mean the whole system is wrong. And it is a little hard to suggest that Lucent/Alcatel are patent "trolls." Finally, one of the patents was granted in 1994, well before MP3 became a standard. Maybe Microsoft should have used all that high-priced legal talent to do a simple freedom-to-operate opinion, so at least they would know from whom they needed to get a license.

Isn't it at least possible that Microsoft, a company not so long ago on trial for violating antitrust laws, pays as little attention to patent law, in view of its ability to hire good lawyers? The answer is simple - get a license and all this goes away. Make the patent holder take you to court, and maybe you don't get the benefit of the doubt (or the reasonable license).

While you are at it, before you write a column about a patent, why don't you spend the time to ask someone knowledgeable about the patent to explain it to you? The fact that you can't understand it doesn't mean anything.

Posted by: Kevin E. Noonan | February 23, 2007 10:53 PM | Report abuse

I agree with Mr. Noonan wholeheartedly. If you don't know the specifics, you shouldn't generalize. You should at least have a general understanding of the patent(s) before you start analyzing the matter in its entirety. By the way, I don't feel any particular sympathy for Microsoft either.

Posted by: Dan Nelson | February 23, 2007 11:10 PM | Report abuse

Patents are issued for software and business methods because of court decisions which interpret the federal patent law to include these areas as patentable subject matter.

I was a patent examiner for thirty years and almost all of these decisions were handed down during my tenure at the Patent Office. The agency fought the idea of issuing such patents tooth and nail because they are virtually impossible to assess for patentability.

Blame the courts.

Posted by: R. Richardson | February 24, 2007 12:48 AM | Report abuse

Mr Noonan: Microsoft and everybody else in the industry (Apple et al) have been paying royalties for the Fraunhofer Institute. Why didn't L/A put their hands up years ago?? Obviously they didn't understand THEIR OWN PATENTS or had more carnivorous appetites.

Lucent/Alcatel are now free to go after Apple and all the others who have been similarly unaware of this matter.

Ultimately all these costs will be passed onto the consumer.

Posted by: Minsk | February 24, 2007 5:58 PM | Report abuse

The first patent referenced in the article was issued in 2006, but was a "reissue application" for a patent filed in 1994, which itself were a sequence of continuations back to an original application filed in 1988.

In other words, all or much of the material in this patent has been around for 17 years, but the attorneys have kept the application alive for 16 years of that period and now suddenly pop up and say they have a patent over technology that was developed in that timeframe (presumably with no knowledge of the original patent application).

It's hard enough to do a rigorous patent search for a new technology when patent filers & holders are up front and timely in their claims, let alone deal with applications that are quietly strung along for 16 years.

Posted by: Lotharsson | February 25, 2007 10:14 PM | Report abuse

It is amazing how little information could be dangerous.

Do you really think that the patents in question are already being licensed through Thomson?

Do the research and you will see the patents Microsoft is claiming it licenses through Thomson are not the ones that they got sued for. They are similar but not the same.

I am surprised Thomson is not commenting on this. They obviously know this.

Meanwhile, everyone is reporting the story wrong.

The jury saw through this and ruled accordingly.

This could really be big for Alcatel Lucent as they could now sue others for much more.

Posted by: Truth Seeker | February 25, 2007 11:08 PM | Report abuse

Isn't Apple licensing the IP of these Lucent patents in their AAC encoding used on all iPods? That is hardly failure to expliot one's own invention. Or did I miss something and the iPod was a failure that didn't last on the market?

Posted by: Douglas | February 26, 2007 5:48 PM | Report abuse

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