An Overview Of The MP3 Patent Mess

The recent MP3 patent case against Microsoft has brought light on the mess of MP3 licensing. Many think MP3 is an open format, that is free to the public and manufacturers, and that the Fraunhofer Society of Germany invented the format. However, as you read on, you’ll see that the format is a tangled web of patents, rights holdners and inventors.

The confusion stems from the number of companies and institutions, including Royal Philips Electronics, Thomson, and AT&T’s Bell Labs (now part of Alcatel-Lucent), that worked to create the MP3 standard almost two decades ago. The patent claims of those and others are increasingly being backed up by nasty and vindictive enforcement efforts, including lawsuits and even seizures of music players by customs authorities.

Until now, the most prominent holder of MP3 patents has been the Fraunhofer Society of Germany, which was founded in 1949 and has become Europe’s largest applied research organization. The division that helped develop MP3, the Fraunhofer Institute for Integrated Circuits, earns millions of dollars a year in licensing fees from software makers like Microsoft, which incorporates the format into its Windows Media Player, and from music player manufacturers like Apple. The payments–typically $2,500 for a video game, or $2 a unit for music players–are administered for Fraunhofer by the French electronics firm Thomson, which also played a role in the early development of MP3.

The Web site of the Fraunhofer IIS is punctuated with references to the institute as “the birthplace of MP3,” “the home of MP3” or “the MP3 inventors.” Its detailed online history of MP3 portrays the format as an outgrowth of German university research in the 1970s, when German engineers began working on audio compression. But Alcatel-Lucent, which won a court judgment against Microsoft last month worth 1.6 Billion dollars, has its own version of that history. It says Bell Labs was the main creative engine behind what went on to become the MP3 standard. Alcatel acquired Bell Lab’s patent rights when it bought Lucent Technologies last year.

The group that made the MP3 standard official is the International Organization for Standardization, or ISO, a nongovernmental group based in Geneva that sets specifications for items as diverse as shipping containers and dashboard indicators. One of its many internal bodies is the Moving Picture Experts Group, or MPEG, a team of industry specialists established in 1988 to standardize digital multimedia formats. Many proposals were submitted for the first standard for audio and video compression, called MPEG-1, which was completed in 1992 and formally published in several parts in 1993. The chosen proposals included Musicam (also known as MPEG-1 Audio Layer 2, a format used in digital broadcasting) and Aspec, which went on to become the basis for MPEG-1 Audio Layer 3, now called MP3.

Now the waters start to get murky

Several companies claim patent rights to Musicam, and by extension, to a piece of MP3. “In the case of MP3, it is very clear that this was not developed only by AT&T, Fraunhofer and Thomson, because it was based upon Musicam,” said Leon van de Kerkhof, a program manager at Philips Applied Technologies who was also a crucial member of the MPEG group at its inception. Thomson and Fraunhofer, he said, “have always positioned themselves as the inventors of MP3, but it doesn’t mean that they are the only ones who contributed to the standard, and certainly not that they are the only ones who have intellectual property rights on the standard.” Thomson’s licensing program, she said, is based on 20 separate patent families that “cover at least part of” the MPEG specifications. Thomson licenses these patents to more than 400 hardware and software companies.

Muddling matters more, many of the companies on Thomson’s list of licensees, including Apple, Microsoft, Motorola, Nokia and Samsung, also pay for additional MP3 licenses from Sisvel, an Italian company whose American subsidiary is called Audio MPEG. According to Sisvel, the MP3 patents it represents (on behalf of companies including Philips and France Telecom) are “compulsory for complying with the ISO standard.”

Sisvel has notoriously enforced these patents. In one ugly case, German customs authorities confiscated SanDisk MP3 players from the SanDisk booth at a German trade fair last September. In 2005, Sisvel sued Thomson over licensing fees for MP3 patents that Sisvel said Thompson had stopped paying; they quickly settled.

In February, a little-known company called Texas MP3 Technologies also entered the fray, suing Apple, Samsung and SanDisk for infringement of what it said were its rightful MP3 patents.

Microsoft claims it was doing the right thing when it paid Fraunhofer $16 million to license the MP3 audio format, however a jury ruled that Microsoft had failed to pay another MP3 patent holder, and slapped it with a $1.52 billion judgment.

The Future: This tangled web of sex, lies and patents is only going to get uglier. In the end, as usual, the only winners will be the lawyers.

Author: FutureMusic

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