Week in review: Microsoft's kick in the patents

While Microsoft finds itself in a dogfight over patents, battles over the iPhone trademark and satellite radio settle down.

Patents are lucrative in the tech community, and this week, Microsoft found itself in a patent dogfight.

A federal jury ordered Microsoft to pay $1.5 billion to Alcatel-Lucent in a patent dispute over MP3 audio technology used in Windows. In its verdict, the jury assessed damages based on each Windows PC sold since May 2003. The case could have broader implications, should Alcatel-Lucent pursue claims against other companies that use the widespread MP3 technology.

Microsoft said the verdict was "completely unsupported by the law or the facts" and noted that roughly half of the damages are for overseas sales of Windows. Such damages could be affected by a separate patent case that involves Microsoft and AT&T. That case, currently before the U.S. Supreme Court, deals with whether overseas sales of software products should be subject to U.S. patent law.

Wading into the complex spat between Microsoft and AT&T, Supreme Court justices voiced skepticism with a prior reading of patent law that American software companies argue could place them at a global disadvantage.

The conflict centers on part of a U.S. statute that restricts American companies from shipping "components" made in the United States to foreign manufacturers, which could combine them to make a machine that infringes on U.S. patents. The statute does not stop them from sharing design plans that would spawn an identical product.

The U.S. software industry fears that a ruling against Microsoft could expand its vulnerability in patent infringement suits compared with global rivals and could make it more attractive to locate research operations abroad. AT&T, on the other hand, says software companies need only worry if they're committing infringement in the first place.

CNET News.com readers responded with scorn for the patent system.

"I'm no lawyer, either, but this (intellectual property) thing seems so outdated in this Digital Age and (with) open source," one reader wrote to the TalkBack forum. "There are thousands of products using MP3 compression, for crying out loud."

Indeed, it's not every day that both the U.S. government and advocates of free and open-source software align themselves in court with Microsoft. But the high-stakes patent case has attracted a slew of briefs supporting the Windows maker's stance.

The question boils down to whether American software makers are required to pay up for infringing on U.S. patents based not only on the number of software copies they supply on their home turf but also on copies that foreign manufacturers make abroad. There's widespread fear that a loss for Microsoft could deal a multibillion-dollar blow to the American software industry.

Critics of lower-court rulings favoring AT&T say they defy Congress' intentions, forcing American companies to pay damages based both on infringing activity in the United States and abroad, whereas a foreign company found to have infringed on a U.S. patent would have to pay damages based only on its U.S. sales.

In and out of focus
Don't expect Microsoft to stand pat in a video-sharing sector dominated by Google's YouTube. A week after a test version of Microsoft's video site, Soapbox, went live, the company sized up at least one potential acquisition target, sources say.

Last month, executives from MSN toured the Los Angeles headquarters of video-sharing site Revver, according to multiple sources. In addition to Microsoft, sources said, compression-technology maker DivX, which operates a video-sharing site called Stage6, has also taken a look at Revver.

The talks between Microsoft and Revver reveal two things: Microsoft is busy trying to get a handle on video sharing, while beleaguered Revver is busy getting a handle on its future.

Meanwhile, entertainment conglomerate Viacom has announced a deal to license its programming content to Joost, the online-video start-up created by the founders of Skype and Kazaa. The deal is designed to bring television and theatrical content from Viacom's brands--which include MTV Networks' Comedy Central, as well as Black Entertainment Television and Paramount Pictures--to Joost upon its full launch.

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