Alcatel-Lucent Wins $1.5 Billion From MSFT

Friday, 2007-February-23 at 01:20

Wired: AP Technology and Business News from the Outside World on Wired.com

Here’s another example of how bad the patent system really is. Microsoft paid for licenses to all known patents relating to the MP3 music file format. Later on, Lucent sues Dell and Gateway for violating their patents for the same format. Microsoft joined in, because the patents affected Windows. Now, despite the fact that MSFT had licensed the patents from the industry licensor of those patents, they lose in court and are faced with $1.52 billion in damages. (Note for European readers: A US billion is one thousand million, not one million million.)

Microsoft disputed that Paris-based Alcatel-Lucent’s patents govern its MP3 encoding and decoding tools,and said it licenses the MP3 software used by its Windows Media Player from Fraunhofer-Gesellschaft, a German company.

“We believe that we properly licensed MP3 technology from its industry recognized licenser – Fraunhofer. The damages award seems particularly outrageous when you consider we paid Fraunhofer only $16 million to license this technology,” Burt said.

Patents are bad news for software. Period. They have no redeeming value. They do not help invention (the discovery or creation of new things) or innovation (the renaming, repackaging, and repurposing of existing things).1 Instead, software patents are a tool that is used to harass competitors or leech money from legitimate software businesses into “IP licensing” firms. Often, software patents govern things so simple and obvious that one must wonder how even a non-technical patent examiner could have approved of it.

Even where software patents appear to cover something that is really new, software is a kind of knowledge work that is similar to academic research. Today’s software builds upon the inventions and innovations of the past, just as tomorrow’s software will build upon the inventions and innovations of today. Software, like universities and colleges, depends upon cross-fertilization of ideas from one place to another. Indeed, when one place (whether software development house or university) locks itself into a “local is better” mode, over time, it becomes less and less relevant, until that place eventually loses whatever attractiveness it had for the talent necessary for it to continue.

I think that it is vital that we praise Microsoft when they are in the right, as in this case and the Eolas / UC Berkeley case. Likewise, we should rip them up when they are wrong, as in the European unfair business tactics / monopoly case. In this case, Microsoft is in the right, and Alcatel-Lucent is squarely in the wrong. (Note: if Lucent felt that Fraunhofer-Gesellschaft did not have the rights to license out the MP3 patents, or if there were other relevant patents (for use of the MP3 format) that F-G’s licensing didn’t cover, they should have gone after F-G to clarify exactly what patents applied to the format. If it turned out that there were additional patents that needed licensing, they could then have contacted hardware and software companies that made products that needed the additional patent licenses.

I must, though, again emphasize that the existence and enforcement of software and business method patents is a brake upon the economy, affecting technology-producing and technology-using firms most severely, but these are the very firms that Adam Smith told us are likely to produce above-market (or below-market) returns each year. If we do not free our businesses from the grip of patents, our children and grandchildren had better memorize that famous line, “would you like fries with that?“, because those are the only jobs that will be left in our country.

That is why I am hoping that the Supreme Court will indeed decide to remove or at least severely limit the patentability of software and business methods. For those that fear the loss of the ability of software inventors and innovators to lock in enough profits to repay themselves for their efforts, I assure you that the true creators are not motivated primarily by money, but by desire to improve the world and by excitement for new technologies. In many cases, they would do it for nothing, as long as their needs were met.

Hey… That sounds like the “long haired smellies” of the open source movement.

1 Let us consider those parenthetical phrases to be the definitions of those terms, because that is how they are used in the context of software.

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