Microsoft suffered a big intellectual property blow yesterday when a jury handed Alcatel-Lucent a $1.52 billion infringement award in a patent dispute over the software giant’s use of MP3 technology, which Alcatel-Lucent claims it owns. It was the highest award for a patent infringement case, topping even the $909 million that Kodak was ordered to pay to Polaroid in 1990 over Kodak’s infringement of Polaroid’s instant camera technology.
By all accounts, however, Microsoft plans to appeal the verdict and stands a good chance of getting the amount reduced. Moreover, the likelihood of the judge actually stopping Microsoft from sending out products embedded with MP3 technology seems pretty slim.
So chances are nothing will change immediately. Nor will Microsoft be forced to cough up the $1.5 billion soon (and even if Microsoft ends up paying the amount, it reflects only about 5% of the $29 billion in cash that Microsoft has at hand.) But in the long run, Microsoft, along with the rest of the software industry, is facing endless patent disputes that slowly eat away at vitality.
Alcatel-Lucent is battling Microsoft in four other cases in the same San Diego court, which involve speech coding technology in Windows, user interface patents, technology in the Xbox console, and video coding in other Microsoft software products.
The good news: Microsoft is embroiled in another patent fight against AT&T before the Supreme Court which, if it wins, could limit how patent infringement amounts are calculated.
With all this drama, can it be any surprise that Microsoft’s General Counsel Brad Smith said yesterday that he “expects intellectual property to be the most important subject facing Microsoft in Washington, D.C., during the next decade.”
Part of the problem is how bad the patent system is in the U.S., including how juries calculate damage awards. Although a very tedious and complex subject, patent reform is high on the congressional agenda, with House Judiciary Committee Chair Howard Berman (D-CA) promising to introduce an overhaul to the entire patent system and legal process soon.
A lot of bad patents get issued because the patent office is overwhelmed by complicated applications (right now there are 800,000 backlogged patent applications) and there aren’t enough capable and knowledgable patent examiners to go around. And that’s just the start of the problems with the current system.
Speaking last month at the Internet Caucus’ State of the Net Conference, another leader on the Judiciary Committee, Rep. Rick Boucher (D-VA) highlighted the need to fix the patent laws so that Internet and computer technology businesses don’t get hopelessly bogged down in needless litigation and bad jury decisions. “The technology industry more than any other has been victimized by the poor patents that have been issued by the patent office,” Boucher said.
But even if Congress is successful in straightening out the patent system — a big if given that both Democrats and Republicans have been trying for years to fix the Patent Office and patent law — the solutions won’t likely arrive in time for Microsoft to turn around its situation with Alcatel-Lucent.
Cynthia Brumfield at 9:56 AM|Comments(1)
I think that in this case the fine isn't fair.
Microsoft payed to Fraunhofer to have the license of mp3, so I think that a cause against Fraunhofer instead of Microsoft would be more fair.
On the other hand only a cause against Microsoft could be economically a good affair.
Posted by: wisher at February 23, 2007 11:22 AM
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