Microsoft lost a battle today in the ongoing war between themselves and Alcatel-Lucent over the patent infingement issues stemming from the use of the MP3 file format in media players such as Windows Media Player. Microsoft is really only the tip of the iceberg. Since the format is used in the vast majority of other media players such as RealNetworks’ Real Player and Apple’s iTunes, this case is more the prerequisite for a much broader legal campaign.

Microsoft claims to have already paid $16 million in royalties, just like hundreds of other companies, to Germany’s Fraunhofer Institute which up until this point was credited with developing the MP3 compression technology. Fraunhofer has been licensing the technology — through Thompson SA — to everyone who even thinks of creating an MP3 media player. Which begs the question, why didn’t Alcatel-Lucent go after Fraunhofer instead?

In any case it’s apparent the jury doesn’t agree with Fraunhofer’s claim to ownership of the patent and has handed down a verdict worth $1.5 billion to Alcatel-Lucent. Because this was a jury verdict it does make one wonder how many of those jury members knew what an MP3 was before this trial. An even further stretch might be to question how many had at least a minimum grasp of the format and the technology behind it. Microsoft argued during the trial that just one of the licensees paid Alcatel a licensing fee of $1,450. However, it seems that argument fell on deaf ears.

The LA Times reported that:

“The damages, yet to be finalized by the judge hearing the case, were based on the number of Windows Media Player programs that have been installed on hundreds of millions of personal computers since 2003.”

The French telecommunications company Alcatel-Lucent it seems has simply become a virtual law firm instead of a telco, seeking compensation for the many patents it holds one of which happens to be a method of compressing music files that you may have heard of. If they win overall against Microsoft it will open the door for them to start seeking monetary damages from all the other media player vendors as well. The staggering amount of money (after legal expenses) they could make from settlements and legal extortion alone has got to have it’s executives all wide-eyed with the possibilities.

Microsoft is of course appealing this decision on multiple grounds so it’s not likely Alcatel-Lucent will be getting a personal check from Bill Gates any time soon.

More Sources Reporting This

Information Week

CBR Diner’s Club

BBC News