About this news article

Microsoft has been ordered to pay $1.52 billion in damages to Alcatel-Lucent SA for violating two patents involved in its use of MP3 conversion software.  Until now, companies such as Microsoft, Apple, Dell and other users of MP3 technology assumed that they just need to license the MP3 technology from Fraunhofer-Gesellschaft, however apparently it looks like the Fraunhofer license may not be enough.

While Microsoft plans appealing this case, it may take over two years for it to reach the US Court of Appeals, which means that in the mean time, this ruling puts a lot of companies that license MP3 technology from Fraunhofer at risk.  While $1.52 billion is huge to start with, this is only about a third of what Alcatel-Lucent originally wanted.  However, as the court ruled against Alcatel-Lucent's claim that Microsoft wilfully violated the patents, the charges were reduced.  The damages were calculated based on Microsoft's global Windows sales volumes and PC sales from May 2003 on.  As Microsoft only pays Fraunhofer $16 million to license its technology, they see these charges as completely outrageous. 

Thanks to heystoopid and Waethorn for letting us know about this news. heystoopid made the following comment:

A truly interesting recent decision in favour of Lucent-Alcatel, indeed what price increases are in store for all future mp3 players that be the question? 

Waethorn also added:

So former licensees that purchased from Fraunhofer are no longer legal holders of MP3 technologies? This is one of those news pieces that might look uninteresting but after reading it, I realized that it has a huge bearing on the digital media world in the long term. If Microsoft can't appeal their case, they'll likely make a complete switch to Windows Media technologies, which in all fairness is both a blessing for some, and a curse for others. WMA is a more efficient codec than MP3, which is good for users, and yet Microsoft might make the argument to music execs about their Windows Media DRM strategies, which is bad for users. Although WMA is compatible with more digital audio devices on the market, it isn't compatible with the market-leader - Apple's iPod. Apple also doesn't like to play in the same ring with Microsoft, so they're not likely to license WMA. It's just one more thing that leaves users in the lurch.

Food for thought: If Microsoft can't appeal or in any way turn down payment of these ridiculous charges, many MP3 licensees, including Apple and RealNetworks, can also face similar litigation, so we might even see the death of MP3 upon us. This might lead to a huge gap in compatibility between digital audio devices and systems, because MP3 is currently the most widely-accepted compressed format across all systems. We're looking at some strange times ahead....