Company Sues MPEG-LA, Claiming Antitrust Violations Over Patents

from the this-could-be-interesting... dept

Mon, May 24th 2010 3:38pm — Mike Masnick

It's no secret (though certain copyright and patent system defenders insist otherwise) that copyrights and patents are monopoly privileges, granted by the government. In fact, some of our elected officials have made the argument that antitrust law should be used against the worst abuses of intellectual property law. While it's unclear how successfully that will play in courts, we may soon have a bit of a test case. Slashdot points us to the news that German company Nero AG is suing MPEG-LA, claiming abuse of monopoly power with its patent pools for licensing digital video codecs.

As you may recall, MPEG-LA acts as a patent pool for many important patents related to digital video -- to the point that the organization appears to believe it is not possible to do digital video without infringing on those patents. Recently, the company has been getting more aggressive, first starting up a separate patent trolling subsidiary, and also threatening Google and others for trying to set up a new open video standard.

In this particular case, the details are important. OS News notes that MPEG-LA had approached the Justice Department back in the 90s to get an "all clear" against any antitrust problems, which the DoJ gave with some conditions. Nero suggests those conditions have not been met:

First, the MPEG-LA would engage with independent experts to ensure only essential patents would be placed in the MPEG-2 pool. They told the DOJ that the MPEG-2 pool constituted of 53 essential patents. Second, independent experts would "weed out nonessential patents" from the pool. Third, licensing terms would be "fair, reasonable, and nondiscriminatory".

Nero claims none of these safeguards were honoured, and here's where it gets juicy; "absolute power has corrupted the MPEG-LA absolutely", according to Nero. First of all, the so-called independent expert was anything but independent. The expert helped form the MPEG-LA, helped in drafting the first MPEG-LA licensing agreements, answers questions from licensees on behalf of the MPEG-LA, has attended business settlement meetings on behalf of the MPEG-LA, and has testified before US congress on behalf of the MPEG-LA. Heck, he is listed on the MPEG-LA website as "MPEG-LA's US patent counsel".

Nero also claims that the MPEG-LA has unlawfully extended its patent pools by adding non-essential patents to the MPEG-2 patent pool. Even though the MPEG-LA told the DOJ there were only 53 essential MPEG-2 patents, the non-independent expert added round and about 800 more patents to the pool, extending the duration of the patent pool, since the old, 53 essential patents expired....

Nero further claims that the MPEG-LA has "formulated and imposed licensing terms that are unfair, unreasonable, and discriminatory", by charging different royalty rates from licensees for the same MPEG-2 license and by not making any downward adjustment in line with the "rapid and dramatic" decrease in costs of implementing the MPEG-2 standard. In addition, the MPEG-LA collects royalties for the same device multiple times (internal hardware, software, monitor, etc.), and the licensing body has failed to "communicate its policies equally to all licensees".

MPEG-LA has responded to the lawsuit by basically accusing Nero of being an infringer with sour grapes. Now let's see what the courts think...

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Filed Under: antitrust, patents, video
Companies: mpeg-la, nero

45 Comments

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Richard Corsale (profile), 24 May 2010 @ 4:23pm

Which is the point after all
This is the exact point that I have been arguing since this debockle began. Last week for example, Microsoft used several of it's broad idea patents (on how buttons are arranged in a tool bar amongst others) to pry the doors open to a market that they had difficulty proliferating. They wanted to extend their illegal monopoly to the.... Wait... So, you're giving a TWENTY YEAR MONOPOLY to a company, with bottomless pockets, that's *been convicted* of tampering with and indeed attempted to destroy the free markets which they, themselves used to establish this deadlock.

Idea Patents... Really? Does that sound like a good idea? This system of intellectual property is an artifact of corruption. If there were no lobby this mess would have been cleaned up years ago.
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:Lobo Santo (profile), 24 May 2010 @ 4:30pm

Re: Which is the point after all
So... we should elect reputable scientists?
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Hephaestus (profile), 24 May 2010 @ 4:36pm

The definition of a monopoly ....
"to the point that the organization appears to believe it is not possible to do digital video without infringing on those patents."

That one line from the people at MPEG-LA says they know they are a monopoly.

Between this and the case before SCOUS on software patents and business methods. This should be interesting.
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Anonymous Coward, 24 May 2010 @ 4:58pm

Re: The definition of a monopoly ....
But they're a German company, what does it matter? Won't their patents mostly apply and be tried in German court?
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Anonymous Coward, 24 May 2010 @ 5:00pm

"In this particular case, the details are important. OS News notes that MPEG-LA had approached the Justice Department back in the 90s to get an "all clear" against any antitrust problems, which the DoJ gave with some conditions."

I don't see how our government simply gives into private interests so easily.
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Anonymous Coward, 24 May 2010 @ 5:04pm

Re: Re: The definition of a monopoly ....
Yea, but they do business in the US
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Ccomp5950 (profile), 24 May 2010 @ 5:06pm

yes, having a government mandated protection against others from innovating in the area of digital video surely "promotes the progress of science and useful arts"...
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MalibuCusser, 24 May 2010 @ 5:15pm

I typically enjoy reading Techdirt, and enjoy the back and forth that generally goes on. However, to read the 4 paragraph detail of the argument against, and then see the dismissive single line response, without a link, is disappointing.

Mike, you typically do an excellent job of presenting both sides to a story, even if you don't agree, but I find this story lacking.
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Anonymous Coward, 24 May 2010 @ 5:34pm

Re:
Why don't you present us with the other side, I and others would be interested in reading it.
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MalibuCusser, 24 May 2010 @ 5:57pm

Re:
Here's the direct link to the story discussing the response.

http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202458503025&MPEG_LA_Shrugs_Off_Anti trust_Allegations
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Anonymous Coward, 24 May 2010 @ 6:14pm

Re: Re:
Thanks.
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Anonymous Coward, 24 May 2010 @ 6:18pm

Re: Re:
Well, I don't really see how this really helps MPEG-LA. Basically, those who innovate must pay money to those who don't. That does nothing to promote the progress, it merely takes money from the successful and gives it to the failures. MPEG-LA (and whoever sold it patents) is a failure, they don't innovate, they merely take money away from others who do innovate. This only hinders progress as that money going towards failures can better be spent towards innovation by the successful instead.
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Anonymous Coward, 24 May 2010 @ 6:27pm

my question would be this: there original 53 patents are still in there, but hasnt mpeg advanced at all since the 90s? does nero expect mpeg-la to just freeze at some random point 15 years ago and call it even? it should be noted that since it has been 15 years, many of the original patents should be falling to the end of their time. what is the situation there?

see mike, there is much more to the story than just slamming them. how about actually trying to get some facts as opposed to a one sided legal claim?
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Sneeje (profile), 24 May 2010 @ 6:30pm

Re: Re:
That's not much of a response, they didn't answer any of the claims, just said "don't listen to Nero, Nero is bad."
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Anonymous Coward, 24 May 2010 @ 6:40pm

Re:
"does nero expect mpeg-la to just freeze at some random point 15 years ago and call it even?"

What?

"it should be noted that since it has been 15 years, many of the original patents should be falling to the end of their time. what is the situation there?"

The situation is that patents are continuing to only hinder progress until they expire in which case new patents will continue to hinder progress.

"see mike, there is much more to the story than just slamming them. how about actually trying to get some facts as opposed to a one sided legal claim?"

TAM, you haven't shown that there is anything more, you are merely speculating that there might be something more. If there is something more, then why don't you present it?
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Anonymous Coward, 24 May 2010 @ 7:12pm

Re: Re:
i am not tam, sorry. but i think that mike brought up the story, but seems to have ignored about 95% of it. all he wanted was the slam against a patent holder. it is unbalanced, and leaves readers such as yourself with a false impression. all i am asking for is more detail on the other side of the coin, rather than just "MPEG-LA has responded to the lawsuit by basically accusing Nero of being an infringer with sour grapes", which is pretty dismissive. i just see a slam, nothing more, which is disappointing. if he put half as much effort into this as he did in having a one sides debate with murdoch a couple of posts ago, we would be much better informed.
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kirillian (profile), 24 May 2010 @ 7:33pm

Re: Re: Re:
Yes, but Mike isn't a news source. He's more of a feed of opinion and discourse on topics. Mike noted the interesting situation provided and provided the view that he saw. This is a completely different tack than his debate concerning Murdoch earlier...that difference is what makes this just as worthy of our time.
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Anonymous Coward, 24 May 2010 @ 7:56pm

Re: Re: Re:
You are free to present the other side, no one is stopping you. I would be interested in reading your analysis.
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Anonymous Coward, 24 May 2010 @ 7:58pm

Re: Re: Re:
Instead of wasting time complaining about something that you think is one sided, why not simply present the other side instead?
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Anonymous Coward, 24 May 2010 @ 8:14pm

Re: Re: Re: Re:
hi mike. its your blog. when i see you post stuff like this, i always think you are trying to hide something, or trying not to show the wider truth. its back to that "standing so close, you can only see the problem" thing. there has to be much more to the story than just a one sided slam at a rights holder, no?
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Richard Corsale (profile), 24 May 2010 @ 8:22pm

Re: Re: Which is the point after all
naaaa, lets keep electing lawyers.
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Anonymous Coward, 24 May 2010 @ 8:30pm

Re: Re: Re:
sort of misleading. if mpeg-la has gone from 53 patents to 800+, there has to be some innovation and development going on there. it isnt like they got handed 800 invalid patents (unless you consider the concept that nailing two things together is somehow patentable, but that creating new technology isnt). there seems to be a whole bunch of innovation here. would you care to explain why you think there is no innovation, and that 800 patents just fell from the sky randomly?
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The Anti-Anonymous Coward, 24 May 2010 @ 8:39pm

Re: Re: Re: Re: Re:
Hello Mike! How's it going? I assume all Anonymous Coward posts are either TAM or Mike, so I figured on the odds being in my favor.

I also believe that TAM and Mike are the same person because I am a paranoid schizophrenic.

Who said that?
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Modplan (profile), 24 May 2010 @ 8:40pm

Re: Re: Re: Re: Re:
What exactly is the wider truth? If Mike is trying to hide something, then actually show it here.

Waiting.
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Modplan (profile), 24 May 2010 @ 8:42pm

Re: Re: Re: Re:
Misleading to think the patent system is so great that 800+ patents relating to video and audio encoding are all valid, even without considering well noted problems with it.
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Freedom, 24 May 2010 @ 8:51pm

Bigger Picture...
I have to believe this is all about the bigger picture. MPEG-LA got in the way of HTML 5, Google come out with a viable alternative, MPEG-LA sees their domainance about to fall, MPEG-LA gets sue happy - threaten Google, folks in industry see that MPEG-LA might be wounded "dog" and decide it is time to attack (could also be motivated supported by Google).

No matter what though, I'm glad to see someone standing up to the MPEG-LA - about time. This isn't about some person in a garage getting screwed after they come up with the next energy source, this is about a company playing the system in the hopes of being a leech on those that work very hard to get products into our hands.

Freedom
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David Johnson (profile), 24 May 2010 @ 8:55pm

Re:
$
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Anonymous Coward, 24 May 2010 @ 10:19pm

Re: Re: Re: Re:
"and that 800 patents just fell from the sky randomly?"

No, they fell from a broken patent office that needs to be disbarred. and I see no reason to believe that more patents = more invention/innovation.

"there seems to be a whole bunch of innovation here."

Where? Preventing others from implementing any idea possible without having them pay you? That's not innovation, that's extortion. Yes, there seems to be plenty of extortion here.
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Anonymous Coward, 24 May 2010 @ 10:38pm

Re: Re: Re: Re: Re:
"Preventing others from implementing any idea possible without having them pay you? That's not innovation, that's extortion" - nothing is stopping others from coming up with their own ways to distribute video that are not infringing. there is nothing stopping companies from licensing the technologies and working with them. oh wait, yes, there is one thing: companies who use the technology, dont pay a licensing fee, and undercut the market. yeah, got it.

there is a single section of fence in the middle of the field. only the truly stupid would be blocked by the fence for very long.
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Modplan (profile), 24 May 2010 @ 11:18pm

Re: Re: Re: Re: Re: Re:
Only the truly stupid would think it's worth paying the MPEG-LA for the patents they hold.
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Richard (profile), 25 May 2010 @ 12:36am

The real issues which we don't seem to be addressing
There are some really controversial aspects of MPEG-LA that we don't seem to be addressing here.

See http://www.osnews.com/story/23236/Why_Our_Civilization_s_Video_Art_and_Culture_is_Threatened_by_the_ MPEG-LA and links therein for more information.

I would like to seem some discussion of MPEG-LA's policy of imposing downstream licensing conditions (surely in violation of the first sale doctrine) and their attempts to extract royalties from those who merely use MPEG equipment or software in a commercial context. (It is this policy and MPEG-LA's licensing doublespeak that lies behind the Nero case).

Another intersting issue is Google's attempts to throw a spanner in the patent works with their special open source license for VP8.
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btrussell (profile), 25 May 2010 @ 3:46am

Re: Re: Re: Re: Re: Re:
Only the truly ignorant would leave the fence standing.
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Anonymous Coward, 25 May 2010 @ 5:14am

Re: Re: Re: Re: Re: Re: Re:
no, only the stupid would pay millions to re-discover the same thing someone else has already made.
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Marcel de Jong (profile), 25 May 2010 @ 7:26am

Re: Re: Re: Re: Re: Re:
nothing is stopping others from coming up with their own ways to distribute video that are not infringing

except overly broad patents.
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Anonymous Coward, 25 May 2010 @ 7:36am

Re: Re: Re: Re: Re: Re:
"nothing is stopping others from coming up with their own ways to distribute video that are not infringing."

If they independently invent something that someone else already patented then that's just evidence that patents aren't needed. and when someone gets patents on every conceivable way of distributing video and encoding it, or at least every efficient and economical way of doing it, then there is no other way around it. Again, that's not innovation, it's extortion. It does absolutely nothing to promote the progress. Why should people have to go through a stupid retarded patent search before independently inventing something. Why should patents take away our right to independently invent? It's not innovation, it's extortion, the patent troll merely takes all the obvious ideas that everyone will come up with independently and tells them that they can't implement it without paying them. That's not innovation, it's an unfair restriction of our rights. Nothing more. Why can't the monopolist instead innovate and bring a competing product to market instead of failing and demanding money from those who do innovate?
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Anonymous Coward, 25 May 2010 @ 7:37am

Re: Re: Re: Re: Re: Re: Re: Re:
Not if obtaining a license from others costs more than rediscovering it yourself.
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Anonymous Coward, 25 May 2010 @ 7:39am

Re: Re: Re: Re: Re: Re: Re: Re: Re:
But of course, with our nefarious patent system, you don't have the option to go through the FAR CHEAPER process of rediscovering it. You must pay extortion money to the patent holder who spent almost nothing writing up the patent and not innovating just because the non patent holder is willing to actually invest in an idea instead of merely wasting money acquiring patents, litigating, and extorting others.
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Anonymous Coward, 25 May 2010 @ 7:43am

Re: Re: Re: Re: Re: Re:
"Waiting."

Don't hold your breath.
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staff, 25 May 2010 @ 8:03am

rights
"copyrights and patents are monopoly privileges, granted by the government"

Close, but no cigar. The Constitution says....

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries

They are rights as in God given, not privileges granted by mere mortals like the federal government. The founders understood that, but you never will. As the Grateful Dead would say -keep on shilling.

Patent reform is a fraud on America. It is patently un-American.
Please see http://truereform.piausa.org/ for a different/opposing view on patent reform.
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Anonymous Coward, 25 May 2010 @ 8:29am

Re: rights
"They are rights as in God given"

So what religion are you and where does it say that these are rights in your religion?
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Almost Anonymous (profile), 25 May 2010 @ 8:45am

Re: Re: Re: Re: Re: Re: Re:
"""except overly broad patents."""

Yes, a thousand times "Yes!". Broad and vague and useless.
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nasch (profile), 25 May 2010 @ 9:55am

Re:
If the patents on MPEG encoding have expired, then what is the purpose of MPEG-LA? Why, to extract money from the market, of course! The charter for this organization should have stated that it will be automatically dissolved in 15 years' time after it has served its purpose. Now it just exists to keep feeding itself, so it needs to keep getting new patents.
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Mike Masnick (profile), 25 May 2010 @ 10:52am

Re: rights
They are rights as in God given, not privileges granted by mere mortals like the federal government. The founders understood that, but you never will.

Amusingly, the founders said exactly the opposite. I'm wondering why someone on the payroll of Ronald Riley's company would so blatantly lie.

"If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property." -Thomas Jefferson
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Steve, 25 May 2010 @ 12:00pm

Re: Re: Re:
Since the DOJ gave MPEG-LA a free and clear on the condition that the patent pool would only include the most essential patents out of an original pool of 53, the fact that it actually added 800 new patents is the most essential fact in the article.

The DOJ and MPEG-La recognized their violation of anti-trust laws and the DOJ gave them a pass on those violations with certain conditions that MPEG-LA has violated. That means (can mean) that MPEG-LA is in violation of anti-trust law AND is no longer protected by a pass from the DOJ.

That is what Nero is claiming in their suit. the validity of any one of those 800 additional patents has no bearing on this.
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TtfnJohn (profile), 25 May 2010 @ 6:44pm

Re: Re: rights
Sorry you have to pay a licensing fee before he can answer that question and agree to use the response only in non-commercial terms as described by him, from time to time, and certainly never against him or publish said response on that cesspoll of Satan known as techdirt.com
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