Microsoft loses a $1.5 billion suit

Author: Brett Thomas
Published: 23rd February 2007
Comments (25) Stumble
Microsoft may have just found its pockets $1.52 billion lighter.

Microsoft may have just found its pockets $1.52 billion lighter.

Microsoft and its recent lawsuits have been quietly residing on the back pages of business sections everywhere for quite some time. Of these, the suit with the French company Alcatel has been the most curious - it sued Microsoft for the violation of MP3 patents since the format became playable in Windows Media Player back in 2000.

There is finally a resolution to that suit, at least until it's appealed - a federal jury has ordered Microsoft to pay $1.5 billion.

As can be expected, Alcatel is incredibly pleased with the ruling and Microsoft is rather unhappy. Alcatel has claimed throughout the suit that it is the real patent holder for MP3 technology, which Microsoft says that it licensed from a German company named Fraunhofer. At the time, Fraunhofer was considered the worldwide license holder, and sold Microsoft rights for $16 million

Though Microsoft was under the impression that it had proper clearance for the technology, a jury apparently decided otherwise. It handed down a $1.52 billion judgement against the company. This decision means that (at least without a successful appeal) Alcatel will be considered the proper holder for MP3 technology, meaning any company that did not pay it could be in the cross-hairs next.

Microsoft has asked that the judge decrease the financial aspects of the judgement considerably. If he complies, Microsoft may allow the suit to stand unchallenged - if not, the company plans to take it up with the Court of Appeals.

Do you have a thought on the Alcatel victory? Tell us about it in our forums.
Quote DougEdey 23rd February 2007, 09:38
Why isn't MP3 opensource yet?
Quote dullonien 23rd February 2007, 09:46
This one seems very unfair. If it was thought that Fraunhofer owned the legal rights and Microsoft payed them, then shouldn't Alcatel be be taking it up with Fraunhofer who was claiming to have rights over something they didn't? How is this Microsofts fault? I don't quite get it.
Quote antiHero 23rd February 2007, 09:57
Strange i always thought that the Frauenhofer institut of technology invented the MP3 algorytm(sp?). Even the Wiki says its from them and i read it in 3 languages. But they can be wrong :D
Quote kenco_uk 23rd February 2007, 10:03
Either Alcatel did 'invent' it or they own balls of brass.
Quote mclean007 23rd February 2007, 10:15
Quote:
Originally Posted by kenco_uk
Either Alcatel did 'invent' it or they own balls of brass.
The don't necessarily have to have invented it - they could have acquired the patent through other means (purchasing the rights, acquisition of a company that owned the rights etc.)

I am quite surprised by this, however. As far as I knew, Fraunhofer was the rightsholder? I'll be surprised if this judgment stands as is - it will either be reduced to a significantly lesser amount, or it will be successfully appealed.
Quote _DTM2000_ 23rd February 2007, 10:34
This is very unfair on MS. It sounds like they did everything they should to use the MP3 format. If Alcatel did realy own the patent at the time MS purchased the rights, both MS and Alcatel should be suing Fraunhofer for selling the rights to something they didn't own.
I'm sure it's not as simple as that but somethings not right with this.
Quote Darkedge 23rd February 2007, 11:17
Alcatel are being typical evil in this case or just business savvy. Fraunhofer has virtually no money compared to MS, so you sue the ones with the cash.
I'm sure Fraunhofer had the patent and invented it - started creating mp3's in 1998/99 with Fraunhofer programs myself.

from wikipedia:
"On July 7, 1994 the Fraunhofer Society released the first software MP3 encoder called l3enc. The filename extension .mp3 was chosen by the Fraunhofer team on July 14, 1995"
I don't believe Alcatel and hope MS win in appeal and they have to try and sue Fraunhofer.
Quote bilbothebaggins 23rd February 2007, 12:14
Quote:
Originally Posted by http://arstechnica.com/news.ars/post/20070222-8910.html

(...) The compression technology used in MP3 files was co-developed by the German technology firm Fraunhofer and the former Bell Laboratories. Fraunhofer was the first group to release an MP3 encoder, l3enc, in 1994. Microsoft claims that they licensed the technology from Fraunhofer for $16 million before they ever shipped MP3 playback support in Windows. Bell Labs was spun off by parent company AT&T into Lucent Technologies back in 1995, and it was acquired by competitor Alcatel in a merger in April 2006. While the rest of the industry assumed that obtaining a license from Fraunhofer was all that was needed to legally implement MP3 technology, it seems that Alcatel thinks otherwise. (...)

Oh, and I get a little confused when Fraunhofer is called a company.
But you can decide for yourself what it is: http://www.fraunhofer.de/
Quote riggs 23rd February 2007, 12:16
I too though Fraunhofer invented/patented the MP3 compression algorithm?!

According to Wiki, Alcatel own patents relating to MP3 compression/decompression, which could mean anything...
Quote mclean007 23rd February 2007, 12:32
Quote:
Originally Posted by _DTM2000_
This is very unfair on MS. It sounds like they did everything they should to use the MP3 format. If Alcatel did realy own the patent at the time MS purchased the rights, both MS and Alcatel should be suing Fraunhofer for selling the rights to something they didn't own.
I'm sure it's not as simple as that but somethings not right with this.
Assuming Alcatel owns the patent and Fraunhofer doesn't, the way it should work is this:
(1) Alcatel sues MS for using MP3 without a licence (done)
(2) MS sues Fraunhofer for purporting to license something to which it doesn't have the rights.

There isn't much point in (2), becuase AFAIK Fraunhofer doesn't have the kind of cash to bother chasing.
Quote:
Originally Posted by bilbothebaggins
Oh, and I get a little confused when Fraunhofer is called a company.
But you can decide for yourself what it is: http://www.fraunhofer.de/
I thought "Gesellschaft" was German for "company"? What do you think it is? It seems to be some kind of applied research organisation, but there is no reason why it couldn't be constituted as a company, unless you know something I don't. In any event, your quote refers to it as a "firm" and as a "group", both of which are broader terms than "company".

Interesting quote, however. I'm going to do some more digging.
Quote mclean007 23rd February 2007, 12:35
...interesting read. I don't really understand what's going on here, but I doubt the court would have awarded $1.5bn if there were no merit at all to Alcatel-Lucent's case. That said, it was apparently a jury trial, which is a pretty daft way to determine such a technical civil matter.

EDIT: It's a shame in many ways that mp3 has become so ubiquitous that devices and software more or less have to support it. I mean, who would buy an 'mp3 player' (common parlance for a digital audio player) which didn't play mp3? But mp3 is technically inferior to pretty much any other codec in common use (Vorbis, AAC etc. - after all, they wouldn't have succeeded in gaining market share if they didn't offer demonstrable benefits over the existing standard) - mp3 has relatively poor compression efficiency, even with optimised codecs such as lame --alt-preset xxx; and it doesn't offer proper gapless playback (though there are some rather inelegant workarounds). Add to that the licensing issue, in contrast to the open source nature of Vorbis, particularly, and it is a real shame that mp3 was first to market.
Quote randosome 23rd February 2007, 13:43
wow, this is quite surprising
also, shouldn't Alcatel have brought this up at the time of MS buying the rights from Fraunhofer and said they didn't actually own the rights

IMO it also seems wrong that MS are getting in trouble for being deceived by a company
Quote ChromeX 23rd February 2007, 14:05
Quote:
Originally Posted by antiHero
Strange i always thought that the Frauenhofer institut of technology invented the MP3 algorytm(sp?)

Yeah same here, I was under the impression that Frauenhofer had all the rights until they sold it.
Quote Redbeaver 23rd February 2007, 14:23
goddamn, 1.5billion.... thats all i can say lol my heart fringe when i heard it....
Quote TomD22 23rd February 2007, 15:36
But....everything uses mp3. Are Alcatel gonna go sue every other digital media player manufacturer, and every other writer of software that can play mp3's now? That's a hell of a lot of sueing against some companies just as big as MS to do. Or am I interpreting that wrongly?
Quote dullonien 23rd February 2007, 15:38
So Alcatel bought Lucent Technologies in 2006 and therefore aquired some sort of patents to do with mp3. When did they sue Ms......a year ago? Did Alcatel aquire Lucent Technologies for any other reason than to take companies like Ms to court?

If the court has ruled against Ms, doesn't this (apparently) mean that every other company that has had anything to do with the mp3 format also owe them money i.e apple, any mp3 player manufacturer, every piece of software that's capable of playing mp3's, most dvd player manufacturers (since most read mp3 discs nowerdays) etc.

This is just ridiculous, why go after Ms, oh yeh thats right, cause they have the kind of money that a court would fine them 1.5bn, and people have a view of microsoft as being bad!

Hope this get's overturned by the appeal court with specialists deciding, not a jury of avarage joe's who have no idea what most of it means and hear the word Microsoft and automatically think they are in the wrong.

Sorry, I really hate the sue crazy world we live in nowerdays.

TomD22 got in there before me!
Quote kenco_uk 23rd February 2007, 15:40
Or did everyone else rtfm and pay Alcatel for the license to use MP3's?

edit: rtfm = 'they knew'. btw, rtfm
Quote dullonien 23rd February 2007, 15:43
rtfm?
Quote gnidnu 23rd February 2007, 16:58
Quote:
Originally Posted by mclean007
I thought "Gesellschaft" was German for "company"? What do you think it is? It seems to be some kind of applied research organisation, but there is no reason why it couldn't be constituted as a company, unless you know something I don't. In any event, your quote refers to it as a "firm" and as a "group", both of which are broader terms than "company".

"Gesellschaft" also means association or organisation. As far as i know, the Fraunhofer Gesellschaft consists of 58 institutes and more than 80 research establishments at all - so i wouldn't call it a company.

There is short but godd article concerning patents and licence disputes in (or on?) the german Wikipedia, but due to lack of vocabulary, i'm not able to translate it.
Quote Aankhen 24th February 2007, 03:01
Quote:
Originally Posted by mclean007
But mp3 is technically inferior to pretty much any other codec in common use (Vorbis, AAC etc. - after all, they wouldn't have succeeded in gaining market share if they didn't offer demonstrable benefits over the existing standard) - mp3 has relatively poor compression efficiency, even with optimised codecs such as lame --alt-preset xxx; and it doesn't offer proper gapless playback (though there are some rather inelegant workarounds). Add to that the licensing issue, in contrast to the open source nature of Vorbis, particularly, and it is a real shame that mp3 was first to market.
Well, yes. That and it works. To most people that's all that matters; these are the people to whom there is no difference between a 128 Kbps MP3 and a 1,411 Kbps audio CD track. They form the majority, not the people who can tell the difference.

Regarding your complaints though, I must add that as far as gapless playback is concerned, the players manage to work around it without any problems if it's important enough to their userbase, and the quality with a recent version of LAME using the right parameters is quite comparable to any other audio codec. I'd say the difference really comes out at lower bitrates. For example, I use 56 Kbps AAC files exclusively on my cell phone. A 56 Kbps MP3 sounds like, well, you know what I mean. :) A 56 Kbps AAC, on the other hand, still sounds (to my ears, at least) pretty much like it did at 320 Kbps. I've actually done an informal comparison to confirm this.
Quote Omnituens 24th February 2007, 17:30
yeah, im a bit confused. i was like, omg someone finally owned MS in a court of law, but after reading the bit on it, i was... puzzled.
Quote GoodBytes 24th February 2007, 19:16
Because MS is so big, everyone takes full advantage of them...
Now, probably MS is going to create it's own format....

When people will learn... OGG > MP3 in all aspect... why not use that? When OGG portable player will exist? I guess probably they did not manage to put DRM on it, so no companies wants to make player that supports it.
Quote GiGo 24th February 2007, 19:17
One would assume that the original MP3 codec was opensource as it were, there are many versions of 'mp3' I have a least 5 different codecs with dbpoweramp, not quite sure what the real difference is. I remember a dialog box poping up in dbpoweramp from v9 (I think) upwards saying 'Number of encoding limits reached, please buy the codec', the codec it reffered to (from memory) was the Fraunhofer codec, might just be my memory playing tricks on me.

I still use a really old version the lame codec. I am one of those people who cant really tell the difference between ACC etc.... but hey not many people can.

$1.52 billion is pocket change! - mmmmmmm me wishes
Quote mclean007 25th February 2007, 02:19
Quote:
Originally Posted by Aankhen
Well, yes. That and it works. To most people that's all that matters; these are the people to whom there is no difference between a 128 Kbps MP3 and a 1,411 Kbps audio CD track. They form the majority, not the people who can tell the difference.

Regarding your complaints though, I must add that as far as gapless playback is concerned, the players manage to work around it without any problems if it's important enough to their userbase, and the quality with a recent version of LAME using the right parameters is quite comparable to any other audio codec. I'd say the difference really comes out at lower bitrates. For example, I use 56 Kbps AAC files exclusively on my cell phone. A 56 Kbps MP3 sounds like, well, you know what I mean. :) A 56 Kbps AAC, on the other hand, still sounds (to my ears, at least) pretty much like it did at 320 Kbps. I've actually done an informal comparison to confirm this.
Sad but true. I agree that the differences between mp3 and better codecs are more discernable at lower bitrates, and tha low bitrate AAC / Vorbis sounds a lot more acceptable than low bitrate mp3. I also use low BR AAC on my phonel, and given the situation (background music through a fairly low quality 'sound system' to keep me amused on my commute and block out the horrible sounds one hears on the Tube), it's perfectly acceptable.

The problem is, most people don't actually listen. 128 kb/s mp3, especially if badly encoded, is quite noticeably inferior to the CD original if you play them side-by-side through decent hardware (any well set up decent separates system), and that's enough to turn me off. Hard discs are so cheap now that I archive all my CDs to FLAC, and transcode to other formats as necessary for my phone, my girlfriend's iPod, mp3 CDs for the car etc.

Anyhoo, I think we've veered sufficiently far off topic now :D. I still think this law suit is a farce.
Quote Wolfman_UK 27th February 2007, 11:51
Quote:
Originally Posted by GoodBytes
When people will learn... OGG > MP3 in all aspect... why not use that? When OGG portable player will exist? I guess probably they did not manage to put DRM on it, so no companies wants to make player that supports it.

I-River make portables that play OGG. Thats one of the reasons im on my second I-River. They are well made, and support lots of formats (my current supports MP3, WMA, OGG, WAV and maybe more that I don't use so can't remember them hehe.

-wolfman
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