MP3's Loss, Open Source's Gain

by Jordan Yerman | February 23, 2007 at 05:20 pm

351 views | 0 Recommendations | 0 comments

This article is linked to djexelta's posting, which you can check out here. In a nutshell, Alcatel-Lucent is using a series of lawsuits to pull itself into profitability, taking advantage of ownership of the MP3 format, which we may have heard of... The goal of these suits would be for Alcatel-Lucent to get paid by companies writing MP3-encoding software. However, another result could also ensnare those writing MP3 playback software. So suddenly a lot of people are taking notice of the other formats available, such as AAC, ALAC, Ogg Vorbis, and WindowsMedia. The sheer ubiquitousness (I'm gonna call that a real word) of digital music files (not to mention audio effects, digital books, etc.) means that companies that trade in such files, in terms of the files themselves, the software to create them or the means to play them, will do whatever it takes to avoid paying double licensing fees for no appreciable gain. It will indeed be a legal quagmire as various companies slug it out over access to the biggest digital medium in the world.

A source close to the matter said when Lucent hit a rough patch financially after the dot-com bubble exploded, the company started looking to its patents as a means of pulling itself back into the black. Microsoft actually commenced the lawsuit that led to Thursday's verdict when it asked a judge to block Lucent's patent claims in order to protect its partners Dell and Gateway. After Alcatel bought Lucent last year, some onlookers thought the matter might end there. But Alcatel, sensing that there might be gold in those patents, decided to keep pursuing the suits. Audio is just the beginning; Alcatel-Lucent's patents for video, speech and user interface are still being contested.

In an e-mail to Wired News, IDC analyst Susan Kevorkian said she believes Alcatel-Lucent may have a legitimate claim to some of the MP3 royalties, but the proper target should be Frauenhofer and not its licensees.

"It looks like there's a flaw in the way that MP3 technology is being licensed, and that Alcatel-Lucent should have been cut into the licensing revenue from the beginning," she said. "If this is the case, then the dispute is between Alcatel-Lucent and Fraunhofer (and other contributors to the MP3 patent), and not between Alcatel-Lucent and MP3 licensees, including Microsoft."

It's hard to say which companies will be affected by Thursday's award. Those wishing to use MP3 have traditionally been subject to two sets of rules for using the codec: one for encoding, and another for playback. If the two patents upheld by the jury today apply only to products that encode audio into MP3s, the ruling would affect only companies such as Apple, Microsoft, Yahoo and others offering software that lets consumers make their own MP3 files.

If they cover playback too, every company involved even tangentially with MP3 stands to lose big. Microsoft's licensing bill for Thomson/Fraunhofer was only $16 million -- about 1 percent of what it now owes Alcatel-Lucent. A significant number of the companies who offer MP3 encoders and/or players could face a similar judgment, with many being driven out of business.