How Microsoft's Big MP3 Patent Loss Could Screw Everyone Else

[InXess]

What's the point of having 12 dumb-asses instead of say 3 qualified judges? Seems like this judge will be overturned this time. Language-wise, no doubt patents are in a different league totally out of reach for an average Joe. It sounds like English, but it's not (in that respect they have a lot in common with Bush). That makes jury system totally incompatible with the requirements for decision makers. It's like giving matches to a baby and expecting something good out of it.

[DereX888]

I just wanted to point out that the judge in this suit is one of the most respected and least overturned "patent" judges in the nation. Patent suits are also extremely difficult for jurors because they are very technical both in regards to the technology as well as the language of patents. Patents literally are another language. You can be pretty much guaranteed that your entire jury panel will have no knowledge whatsoever of the technology and legal priciples that are necessary to reach their verdict. They have to be taught everything at trial in a crash course.

And here we get to another proof of how inefficient and outdated our legal systems are.
Apparently the judge(s) of the first trial had NO CLUE about patent laws (or whatever youre saying) since he was able to find Microsoft guilty, and his ruling is now overthrown at second trial.
Why is he (they?) still a Judge then?
And shouldn't he be fired?
Many court cases are overturned at next trial, and no one tells the jurors or judges of the previous "wrong" trial(s) to take a hike!
I mean if someone can't do his job properly, should find another line of work - or be forced to do so...

The laws regulate most aspects of our lives and as one of most important principles of our civilization (to obey the law) it must be conducted in a professional matter. Otherwise even 'good' people wonder first why the law is unjust, and next they start disbeying it...
If what youre saying is true (about complicated matters of patent laws that the jurors had to have some crash test course right there) it only tells me this system is wrong. Why there are no "law specialists" knowledgeable about patent laws to be called for duty on such trials?
(same goes for paternity cases of the kid were OT-ing about earlier, and so on; if the case is such highly "specialized" obviously it should have been run by lawyers specializing in such subject).


Since the first trial was found wrong and ruling is overturned, the 'wrong' judge(s) should have reimburse the costs of entire trial (and perhaps costs of involved parties too). Why they are allowed to waste public money and involved people's time as they please?

[adam]

Unless you sat in on this trial or read the transcript there is no way anyone could reasonably conclude that the judge commit reversible error or that the jury's findings were not supported by the facts. The outcome of this case was a suprise, but there is nothing clearly erroneous about it.

The jury system is not perfect but trial by court isn't either. Our system allows the parties to select which version they want. In this case they chose trial by jury.

The argument that the jury system is inappropriate for patent cases, as opposed to just about all others, is not a new one. It really is the most difficult kind of case for a jury to understand. Yet most patent cases are to a jury because rarely do you want to put a multi-million dollar decision in the hands of a single political figure (most judges are elected, some are appointed, either way its political) The jury system is the ultimate system of checks and balances.

In a trial by jury the judge does not decide the verdict, the jury does. The judge is the gatekeeper. He/She decides what evidence comes in or not and he/she instructs the jury as to the law. The rest is left up to the jury, and the judge can only throw out the jury's verdict if it is erroneous as a matter of law.

[MOVIEGEEK]

adam,
Your sig sums up my feelings toward the first trial.

[InXess]

What if one party wants jury and the other a judge? It goes to the jury... most likely.
Many judges do not hide their affiliation with one or the other political stream. Most presidents appointing supreme court judges do not hide sympathy towards a particular candidate because of his/her political views. That makes judges freedom of decision/impartiality pretty much an institutionalized fiction as they are expected to act in a very predictable and consistent fashion.

When it comes to juries, aside from their impartiality question, the biggest danger is that they won't grasp discussed concepts. Jurors tend to be emotional about issues and it's usually reflected in their decision.

Summing up: you have to choose between an often partial judge or incapable jury often driven by emotions. Would you rather be killed by a truck or a train...(?), type of dilemma. Neither is a good choice. A panel comprising of professional judges familiar with the law is still the best choice and US Supreme Court has no jurors probably for that reason. If jury system was the best then this structure would have been carried over all the way through to the Supreme Court. Otherwise, why would you do away with the jury in the most important, final stage of the trial.

In this case jury made a statement (with their verdict) penalizing MS for entering into a later voided licensing agreement. Problem is that it removes an incentive for others to seek licensing if in case of faulty agreement the party is treated as if acted in bad faith. This is my biggest problem here.
Secondly, the amount of award suggests putting emphasis on penal aspect over anything else. At the time of agreement with Fraunhofer both parties agreed to a sum that was certainly considered reasonable and acceptable. Several years later the same fee was adjusted 100x for exactly the same set of assets. How is this fair? I know, hindsight...

Conclusion: do not come forward with patent ownership issues. Let the market absorb it, if successful hit the other company with the baseball bat because the law is on your side. For Microsoft: steal as there's no reward in being honest and forthcoming.

The jury system is the ultimate system of checks and balances.

Is it really? Greta van Susteren is its big proponent on the TV but she's often caught here by others.

[adam]

A couple of points regarding the amount of damages. It really is not punitive at all. The jury held that MS did not willfully infringe so punitive damages could not be awarded. The amount is large because the measure of damages was broad...but this measure is an acceptable one that is used all the time. In this case it just results in massive numbers because of the amount of sales that MS does. The reason that the amount is so much higher than the licensing fees that MS paid to Fraunhofer is because MS licensed the technology at a time when mp3 was not yet proven viable. It was a new technology and there was no guarantee that it would be commercially viable. In other words, Fraunhofer gave MS a fantastic deal by licensing it in a lump sum deal. Bell might not have done that. They might have licensed it for a period of years as is usually done, meaning they could have made millions more on the technology than Fraunhofer. This doesn't mean the damages awarded in this case aren't excessive. These are just points to consider.

edited: The second to last line was supposed to be a negative. I do believe the damages are excessive.

[oldandinthe way]

The amount of the damages is questionable because it was based on the total value of the PCs sold, not the value of the operating systems sold. This will probably result in a reduction on appeal. MS did not sell PCs.

Compounding the error was the fact that the damages were calculated on PCs outside the jurisdiction of the court as well as those within the jusrisdiction.

Complicating matters is the fact that MS agreed to idemnify HP and Dell for all patent issues relating to the OS, so they would be liable for greater damages on those systems.

In my opinion the damages were excessive. Either the jury was not properly instructed, or they chose to ignore the instructions - or they were idiots.

[InXess]

A couple of points regarding the amount of damages. It really is not punitive at all. The jury held that MS did not willfully infringe so punitive damages could not be awarded. The amount is large because the measure of damages was broad...but this measure is an acceptable one that is used all the time.

Adam, yet we have somehow ended up with the highest patent related award in the history of mankind...(?!) Looks like jury has assumed that there's not much more to computers other then listening to MP3's. MP3 is very popular but as a "sector" in the whole industrial picture has not been a major force, at least not yet.

In this case it just results in massive numbers because of the amount of sales that MS does. The reason that the amount is so much higher than the licensing fees that MS paid to Fraunhofer is because MS licensed the technology at a time when mp3 was not yet proven viable.

Precisely, Alcatel has managed through this trial to "renegotiate" the conditions of the original deal but... by 100 fold? Wow.

It was a new technology and there was no guarantee that it would be commercially viable. In other words, Fraunhofer gave MS a fantastic deal by licensing it in a lump sum deal. Bell might not have done that.

This should be totally out of the picture (by judge's instructions). Microsoft could have given out wmv licenses for free had they anticipated MP3 success and future due royalties. Who knows, we could have had wmv take the market... Look what happened to Internet Explorer and Netscape - free product can make miracles happen. This speculative aspect "would have, could have..." makes things impossible to solve and has to be omitted.
Would MS have licensed MP3 technology if Lucent had attached a 1.5 bilion tag to it?

They might have licensed it for a period of years as is usually done, meaning they could have made millions more on the technology than Fraunhofer.

Without Microsoft's nod? No they couldn't. It could be argued that had MS known about the dangers of engaging in such dealings they would have skipped MP3 altogether. Would that have stoped Windows from selling?

This doesn't mean the damages awarded in this case are excessive. These are just points to consider.

Apple is not using MP3 and is still very successful. Argument that MP3 was/is the key factor is simply phony. MP3 became big because of Microsoft Windows platform, not the other way around.
The verdict clearly suggests the opposite putting way too much value in MP3.
Microsoft could have left MP3 out (not integrate it) and let 3rd party developers supply the applications. In fact MS has opposed the whole MP3 idea for a long time. It could have been that an affordable MP3 license fee persuaded them (!) to take this route.
As you see, the difficulty here is looking at the licensing agreement as it would have been structured at the time of MS-Fraunhofer deal plus some extra cash to sweeten it. Not try to rewrite the history. Any of those issues may be argued both ways.

[ViRaL1]

Judge Rules for Microsoft in Alcatel-Lucent Suit

jump - http://www.eweek.com/article2/0,1895,2100131,00.asp?kc=EWNAVEMNL030507EOAD

[InXess]

already posted here:
https://forum.videohelp.com/viewtopic.php?p=1667415#1667415

this is not related to MP3

[Cornucopia]

No, but it IS related to patents, which is one of the things we are discussing here.

BTW, Apple DOES us MP3 in iPods, they just don't promote it as their "flagship" codec. Funny thing is, most college users still use MP3 anyway, so they can easily share with their mates. (I get that firsthand from scores of college students I know, including my son).

And I would say that MP3 became big because of Napster and free downloading. It just happened to be written for windows because that's the predominant platform. If MacOS had been the predominant platform, Napster would have been written for it.
The Content was the draw (and the ease of getting it), not the architecture of delivery.

Scott

[adam]

This should be totally out of the picture (by judge's instructions).

I'm not talking about how or why the jury reached the verdict that they did. I am putting the numbers a bit more into perspective. I have already stated several times that I think the award was excessive and that I will not be the least bit suprised if it is reduced on appeal. But you can't talk about the largest patent award in history without considering that one of the parties happens to be one of the richest companies in history, and that the alleged infringing technology was a part of their most lucrative product line for a significant number of years. Assuming these patents were infringed, the award is going to be high no matter what. And I stand by my statement that no one can reasonably critique the finding of infringement (not the amount of damages awarded- that's fair game) without knowing what the jurors know. This is way too technical of a case for someone to call without hearing any of the evidence.

[nwo]

, more commonly referred to as MP3, is a popular digital audio encoding, lossy compression format, and algorithm, designed to greatly reduce the amount of data required to represent audio, yet still sound like a faithful reproduction of the original uncompressed audio to most listeners. It was invented by a team of German engineers of the Fraunhofer Society, who worked in the framework of the EUREKA 147 DAB digital radio research program, and it became an ISO/IEC standard in 1991.

It was invented by a team of German engineers of the Fraunhofer Society

Pulled from wikipedia, so did Fraunhofer invent MP3 or not?

[DereX888]

, more commonly referred to as MP3, is a popular digital audio encoding, lossy compression format, and algorithm, designed to greatly reduce the amount of data required to represent audio, yet still sound like a faithful reproduction of the original uncompressed audio to most listeners. It was invented by a team of German engineers of the Fraunhofer Society, who worked in the framework of the EUREKA 147 DAB digital radio research program, and it became an ISO/IEC standard in 1991.

It was invented by a team of German engineers of the Fraunhofer Society

Pulled from wikipedia, so did Fraunhofer invent MP3 or not?

Well, they invented it the same way as i.e. Microsoft invented Windows
Their 'final product' was based on multitude of other people's work.


Everybody use everybody's code, usually with the licence, sometimes without
Its normal.
Thats what this shitty court case here is about.

[InXess]

2 possibilities:

- either one of Germans, at the moment of weekness, has accepted a check from Bell-Labs and didin't´remember that
and Wiki will have to correct this entry following the appeal

or Microsoft will soon party and the entry stays.

[InXess]

STEVEN LEVY The Technologist, NEWSWEEK
Changes in Patents May Be Pending
'Patent trolls' come out of the woodwork after companies have spent billions on a product.

March 12, 2007 issue - Jon Dudas's flight was canceled, so he didn't make the first day of last week's Tech Policy Summit held in San Jose, Calif. Just as well. One of the subjects of the day was patents, and he could not have avoided hearing the familiar refrain that the system is "broken." Dudas, who is under secretary of Commerce and director of the Patent and Trademark Office, hates that term. As he explained to me over breakfast, after he belatedly arrived in California, the process is certainly not perfect—but even more certainly not broken. "It's the envy of the world," he says. "Brazil, China, other countries, they want to know how we do it."

I'll wager, however, that China would be less than delighted to emulate us if the consequences included events like the one in a San Diego courtroom last month. Following the rules of our system, a jury laid a whopping $1.52 billion judgment on Microsoft for infringing on a patent involving the mechanics of playing MP3 music files. Here's what is outrageous: Microsoft had already licensed MP3 technology from the consortium that developed the standard, for $16 million. Years later, after MP3 technology took off, Alcatel/Lucent (inheritor of patents filed by the fabled Bell Labs) emerged to file its suit, and won almost 100 times as much as what was determined a fair license fee originally (because Microsoft had unwittingly infringed that patent). Unless the judgment is overturned, more than 400 other firms using MP3 technology are prone to a similar ambush.

I'd also guess that China or Brazil does not envy the outcome of the case where Rim (BlackBerry) had to pay $612 million to settle a case—even though the patents in question had been re-evaluated as invalid after the suit had been filed. Those are only two of a number of cases where patent holders used the system to extract huge, apparently unearned, sums. Other problems involve the granting of undeserved patents, which are nonetheless used to extract license fees from companies unwilling to challenge the patents in court.

A who's who of high-tech companies like Apple, Microsoft, Cisco and Micron—though they are themselves big patent holders—are banding together to urge reform. They say their products often involve dozens of potential patents, some of them obscure or poorly granted, and are vulnerable to "trolls" who come out of the woodwork with arguably relevant patents after companies have spent billions developing a product. Meanwhile, small companies can't afford to fight in court. Not everyone agrees. "The argument that the system is broken comes from people who have an ax to grind," says Nathan Myhrvold, CEO of Intellectual Ventures, a company that develops new ideas and also buys latent patents.

Rep. Howard Berman, a California Democrat who spoke at the Policy Summit, is pushing reform legislation, particularly to make it easier to challenge bad patents and mitigating the judicial outrages. He says that previous attempts to pass a bill were blocked by Republicans loath to offend the big pharmaceutical firms, which like patents just the way they are now. Berman is optimistic that he and his allies in both houses will pass a bill that could put a stop to nutty verdicts like the $1.52 billion MP3 judgment.

Under Secretary Dudas himself says that though he's worked hard to improve patent quality (hiring more assessors and increasing the rejection rate), he does support legislation that would make it easier to challenge questionable patents. With the administration onboard and a Congress not as beholden to corporate America, we may just get a law that would make the system less broken. Or, as Jon Dudas would have it, even better.

http://www.msnbc.msn.com/id/17438990/site/newsweek/

[MOVIEGEEK]

UPDATE
US Supreme Court sides with Microsoft:
http://biz.yahoo.com/ap/070430/scotus_microsoft.html?.v=4

[nwo]

Mircosoft buys the Court and Bush!

[edDV]

You missed that Justice Ruth Bader Ginsburg wrote the majority opinion.

[MOVIEGEEK]

Mircosoft buys the Court and Bush!

So you are in favor of paying more to use MP3?
I'm not a MS fanboy but I thought the suit filed by Alcatel was rediculous.

[SingSing]

1988 + 15 = 2003 or 1989 + 15 = 2004

So either way MP3 is not under any patent any more!

[Cornucopia]

SingSing, Patents are usually 20 years long, not 15.

Scott

[lordsmurf]

UPDATE
US Supreme Court sides with Microsoft:
http://biz.yahoo.com/ap/070430/scotus_microsoft.html?.v=4

How is the AT&T case an update to the MP3 of this thread?

[sammie]

I'm in a tech industry where patents are pervasive. I hold several of my own, (Well my company and former companies do, you never get to hold your own anymore). I would tend to agree the system is completely broken. The issue is not just juries. The worst problem is the nature of the patents and the reviewers themselves. Today's patents are way too technical for most people outside the narrow confines of a specialty to understand. No matter how conscientious and intelligent a reviewer might be he can't help but be unable to grasp all the nuances that many patents entail. To give an example, 150 years ago, any reasonably intelligent person could immediately grasp the intent and novelty of a cotton gin, or a sewing machine from a few simple drawings. Now of days, I’ll use myself as an example. I’m a high level R&D chemist by training, but I couldn’t begin to intelligently review a process for manufacturing or utilizing nanotubes. It’s just too specialized even for a chemist outside the field to understand. Most reviewers are technical folks, but they are unlikely to be specialists in an area and quite often simply not of a level to understand a patent (not slamming them, very few of us would be!). They are at best in the same boat as I would be and often worse.

I can tell you the patents that are being granted are absolutely frightening. Patents covering entire concepts or scopes of an entire field are being granted based on a single example or invention. And even that invention is often the direct derivative of prior art and common knowledge. If the applicant, intentionally or not, omits citing the prior work, the reviewer is unlikely to be aware of it, and therefore never knows to limit the scope of the patent request. Certainly these things can be challenged in court, but as pointed out in many other posts, this is all too often decided by who has the deepest pockets. Little Joe Schmoe and his company of 5 have little or no chance of taking on Ma Bell, no matter how right they are. As a senior manager, I frequently have to recommend not pursuing a project due to patents, even though I feel the patents are either not-defensible or totally invalid, simply because the costs involved could never be supported by the product even if we won.

Jurors or even judges that have to rule on patents therefore often have no hope of truly understanding the scope or applicability of a patent, prior art, and so on. The judge at least hopefully understands patent law, and can guide juries appropriately in that, but even that is hit or miss and patent lawyers definitely keep tabs on which judges tend to slant their interpretation in ways favorable to what they want.

Now you throw in the ever expanding time frame for patents on top of this mess and it seems like companies will be able to stifle innovation in perpetuity. Throw in the ever expanding number of companies that see buying and holding patents as their only revenue stream and frankly I don’t see a great out to the whole mess. Patents are necessary and have their place in a capitalistic society. But I think they need to be cut back to only a very limited method or process, not applicable to entire ideas (although the MP3 patents in question I think are ok there). Patent time frames need to be curtailed and non-renewable. But most importantly, I think the awards for patent infringement need to be severely capped, especially for non-intentional infringement. Then larger damages only allowed through punitive and not actual damages.

[oldandinthe way]

The patent system has been improved significantly this week. Although most of the press coverage has been in the Microsoft/ATT suit, in another case a unanimous Supreme Court ruled that the Federal Circuit Appelate court has been too lack in interpreting what is "obvious" and not patentable. Future decisions will have be be more generous in determining the obvious and the current advantage for patent holders should be lessened. It expected that this will greatly reduce the income of "patent trolls".

http://news.yahoo.com/s/nf/20070501/tc_nf/51926

[MOVIEGEEK]

UPDATE
US Supreme Court sides with Microsoft:
http://biz.yahoo.com/ap/070430/scotus_microsoft.html?.v=4

How is the AT&T case an update to the MP3 of this thread?

Are you feeling ok lordsmurf?
RECAP:
AT&T bought Alcatel-Lucent who bought Bell Labs who co-invented MP3
AT&T says to Microsoft:"you never got a license from us so give us money!"
Microsoft says "bite me"
US Supreme Court rules in favor of Microsoft and they lived happily ever after.....

[adam]

Patent time frames need to be curtailed and non-renewable.

Patent terms have not changed much at all over the years and they haven't been renewable since 1861.

1790-1836: 14 years from issuance
1836-1861: renewable up to 21 years
1861-1994: 17 years from issuance
1994-present: 20 years from filing (unless it takes more than 3 years to get approved, then its 17 years from issuance if you qualify for a full adjustment.)

In practice, you're lucky to get a patent for 17 years from issuance today. The truth is that patent terms haven't really changed in length so much as they've changed in how you calculate them.

[DereX888]

UPDATE
US Supreme Court sides with Microsoft:
http://biz.yahoo.com/ap/070430/scotus_microsoft.html?.v=4

How is the AT&T case an update to the MP3 of this thread?

Are you feeling ok lordsmurf?
RECAP:
AT&T bought Alcatel-Lucent who bought Bell Labs who co-invented MP3
AT&T says to Microsoft:"you never got a license from us so give us money!"
Microsoft says "bite me"
US Supreme Court rules in favor of Microsoft and they lived happily ever after.....

nope, not really
"They lived happily ever after" only until next appeal...


Patents should have never been granted to software. Software is a CODE, not a product/device/anything that exists (well yes, it exists virtually, but so does poetry or music and those never get patents).
It was a major mistake, disastrous mistake, when first machine programming code was granted any patent. Clearly those who allowed it had no clue about it, and in how deep shit they were putting the future.

Also, on the other hand, if we could get rid of some 99% of useless US lawyers, we wouldn't have so many stupid law cases as such anymore...

[MOVIEGEEK]

nope, not really
"They lived happily ever after" only until next appeal...
....

Also, on the other hand, if we could get rid of some 99% of useless US lawyers, we wouldn't have so many stupid law cases as such anymore...

Ah...there is no more appeals...the US Supreme Court is it.In fact they made two important rulings regarding patents this week(as oldandintheway pointed out).
As for the last statement I have to agree but adam is excluded.