AT&T Claims MPEG-4 Patent Infringement

Is Apple Computer about to be sued again? They seem like a hot target lately. Some iPod users blame Apple for hearing loss. In another lawsuit related to the iPod, a consumer group is suing over a replacement fee for what they claim is a defective iPod Nano. This week an article in PCMag.com states that AT&T has licensing issues with Apple.

PCMag.com asserts that they have obtained a letter sent to national retailers who distribute products from Apple Computer, Inc. and four other companies (CyberLink Copr., DivX, Inc., InterVideo, Inc., and Sonic Solutions). The letter was written by the licensing director of AT&T Intellectual Property, Michael J. Robinson. In it, AT&T claims that they hold patents related to MPEG-4 video technology and that each of the above companies are infringing on those patents. AT&T also claims that they have proof of patent infringments. It declares that all five companies have been notified and that the companies are being offered a license under reasonable and nondiscriminatory terms.

The retailers were warned that if they obtain MPEG-4 products from any unlicensed company, including Apple and the others, they are required to obtain a license from AT&T or risk damages from selling MPEG-4 products. Damages can include lost profits and royalties. If a company can be shown to willfully violate patent infringement, it could face treble damages and attorneys’ fees.

Apple and the other four companies say that they did not receive notification from AT&T. A representative from Sonic Solutions added that they believe they have all necessary rights and licenses. AT&T spokesman Jason Hillary would not confirm the contents of the letter to PC Magazine, but said that AT&T is working with licensing issues with each company.

The International Standards Organization (ISO) controls the MPEG standard. The MPEG Licensing Association (MPEGLA) administers patents used in MPEG-4 formats. ISO requires members to license patents under reasonable terms. AT&T has chosen to belong to neither organization, so they are not bound by these terms.

Wikipedia gives late 1998 as the date MPEG-4 was introduced. Almost seven years later AT&T is now trying to enforce the claimed patent. The delay in negotiating licensing with these companies just adds to the confusion. With the Video iPod, which utilizes MPEG-4 technology, Apple Computer now becomes a tempting target.

It is reasonable to speculate that AT&T has incentive to ensure that licensing fees are less than the cost of future litigation. AT&T could realize significant financial gains from these licenses. They state that it is their desire to allow others to take advantage of MPEG-4 technology while at the same time making sure they get value back for costs of developing the product.

Apple and the other companies could choose to work out an agreement with AT&T, or allow a court to settle it. Retailers can either license with AT&T or stop selling MPEG-4 products from unlicensed users. This would make them responsible for knowing which companies were using MPEG-4 products that specifically infringe on AT&T’s patents, and whether or not those companies were licensed. It is unclear what timeframe is involved in this.

AT&T did nothing to enforce the patents until the profit was clear. In this day and age, I guess you could consider it a compliment to the success of Apple’s iPod that they are facing lawsuits. The old adage still holds true: follow the money trail.