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Patent Attorney Axel H Horns' Blog on Intellectual Property Law.

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Saturday, February 24, 2007

Fall-out From Alcatel-Lucent vs. Microsoft.

As many of the readers of this Blog may have noticed from the mass media, a U.S. court recently has

awarded

Alcatel-Lucent a sum of USD 1.5bn to be paid by

Microsoft as a compensation for MP3-related patent infringement. However, I am inclined not to be overly surprised if the sum as awarded last week should be reduced substantially upon Microsoft's appeal or as the outcome of some sort of settlement. Nevertheless, it is a huge sum of money.

Details of the judgement have come to be known thanks to the

PatentMonkey Blog. What appears to be interesting beyond the present case is some

confusion arising from the fact that allegedly "Fraunhofer has licensed MP3 to Microsoft in return for a USD 16m license fee". Yes, Microsoft has taken a license in some patents held by Fraunhofer but that does not mean that a product brought to market is automatically immune against other patents of any third parties. Pratent law does not provide any instruments for "licensing MP3". It merely allows to license one or more specific patents. And, one particular item sold might be covered by a multitude of patents. Before bringing any item to market it bis necessary to undertake a clearance screening in order to identify patents which might be infringed thereby.

Think, for example, of an iPod sold by Apple. Let us assume that the various methods to compress and reproduce audio signals utilised by such device are either patent-free or properly licensed. Even under such assumption, Apple might theoretically be liable for patent infringement if say, the plastics material from which the device housing is made, infringes a patent of a chemicals company. Or a particular snap-in mechanism used in assembling the housing might also theoretically infringe third party's patents.

And, of course, even a certain method of data manipulation might be covered simultaneously by more than only one patent.

In this particular case, it looks as if the particular implementation of MP3 brought to market by Microsoft was not only covered by Fraunhofer's MP3 patents but also by patents held or acquired by Alcatel-Lucent. Apparently Microsoft has failed to undertake a proper clearance before starting selling MP3-related software products.

Mr. James DeLong, who surely is not known as an anti-patent crusader,

writes in a ruminative mood:

"[...] Were the Lucent/Alcatel patents clear enough to be found, and for their applicability to be assessed? If so, then why did Microsoft and others fail to license them - they were certainly willing to pay the Fraunhofer Institute, which was thought to be the rights holder.

Did Alcatel/Lucent lie in the weeds, failing to assert any rights until large numbers of companies had committed significant capital? If so, how should this affect the suits? If not, why is the tech world so surprised? I recall reading, though I cannot put my finger on where, that there has been considerable bitterness over accusations that the MP3 rights holders (whoever they are) let the standard-setting process go forward without informing the world of their claims. If this is so, it is important.

How should damages be assessed in the tech world, where every product involves the use of hundreds of patents? As a thought experiment, if MP3 is worth $1.5 billion for Microsoft alone, and if you compare this with all the other IP that goes into Windows (and Microsoft annually shells out multi-millions in license fees), and all the other IP used by other users of MP3, then what total value does one come up with - and does it bear any relationship to the total revenues of the industries?

Are juries the right forum for complex patent litigation? The Constitution provides a right to a jury trial - perhaps it should also provide a right to a NON-jury trial to cover situations where a jury is the equivalent of a dice roll.

Are there issues of the interpretation of ambiguous claims? If so, then should ambiguity be interpreted against the drafter? This does not seem to be the case in patent law, where the appellate court recasts the claims construction runes de novo. [...]"

Maybe that this particular lawsuit points to some problem of information management in the field of patents where it appears to be utmost difficult to conduct a proper patent clearance for any given product.

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Saturday, February 24, 2007

Fall-out From Alcatel-Lucent vs. Microsoft.

VPP