Microsoft may be no stranger to large fines but even Bill Gates himself will be shocked by this one...
A court ruling late last week has revealed that the software, gaming and (to a far lesser extent) audio giant has been hit with a whopping £1.5bn fine for violating two MP3 patents held by Alcatel-Lucent. As you would expect, Microsoft is contesting the decision.
"We think this verdict is completely unsupported by the law or the facts. We will seek relief from the trial court, and if necessary appeal," said Microsoft's Vice President and Deputy General Counsel. “Like hundreds of other companies large and small, we believe that we properly licensed MP3 technology from its industry recognized licensor -- Fraunhofer" he added. "The damages award seems particularly outrageous when you consider we paid Fraunhofer only $16 million to license this technology."
Fraunhofer developed MP3 compression technology with Bell Labs – part of Lucent Technologies, which merged with Alcatel SA last year. Things should be starting to make sense now...
Unfortunately for Microsoft – its Media Player software appears on Fraunhofer’s site – the jury ruled it needed licenses from more than just one half of the development team and calculated a suitable fine based on a 0.5 per cent royalty rate for all PCs sold since May 2003.
Should Microsoft fail in its appeal the knock-on effects of this ruling could be significant for the entire industry since Apple, Dell, RealNetworks, Toshiba, Yahoo! and many others are said to be in a similar position.
It must be said, MP3 licensing in general is a mess. In September last year SanDisk was forced to remove all its players from its stand at IFA after another audio patent holder, Sisvel, successful placed an injunction upon them for unpaid royalties. This has since been resolved.
My stance on MP3 patents: wish I owned one.