Monday, March 12, 2007

Muddling Through MP3 Patent Fights...

Whenever a company creates Mp3 software like iTunes or the Windows Media Player it is required by law to pay royalty fees to the patent holder of Mp3 technology. This was always considered to be a German research group known as the Fraunhofer Society, and Microsoft, Apple, and others paid them millions of dollars in royalties over the years. But last week, as the New York Times reported, a jury ruled that Microsoft had failed to pay another Mp3 patent holder, Alcatel-Lucent, and slapped it with a $1.52 billion judgment.

This is sending shock waves through the music and software communities. Now software developers and Mp3 hardware makers (Apple with its iPod most prominent among them) don't really know who they are required to pay royalties to. The law, as it currently stands, recognizes several different intellectual property owners over Mp3 technology, and leaves the door open for even more, as yet still unknown.

This is potentially disastrous. Ambiguity over who owns the Mp3 patent will undoubtedly have a chilling effect on software companies and hardware manufacturers. Because no one wants to get slapped years later with billion dollar fines, these firms will start shying away from getting involved in the Mp3 business altogether. Consequently, consumers will suffer from less sophisticated products and higher prices (stemming from reduced competition). Apple and Microsoft must be peeing their pants right about now, and I can't say I blame them.

There is a clear lesson to be learned here... firms ought to adopt open and non-proprietary technical standards. Groups such as the World Wide Web Consortium (W3C) exist solely for this purpose, and if more companies integrated their open standards, rather than those owned by other private firms who require royalties, then this whole catastrophe can be avoided in the future. Open standards are often even superior. The digital world needs to look at the programming community for examples - XML, HTML, RSS, TCP/IP, etc.

And as one last parting thought, there is now a fortune to be made by any aspiring lawyer who is willing to develop "a science of muddling through" this new patent mess and develop a legal roadmap for the rest of us.
  

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