MPEG-2 Patent Holder, Licensing Agent in High-Def Codec Dispute

The company which saw the biggest IP infringement verdict in history granted to it and then taken away, faces a new problem this week over another part of its MPEG IP portfolio. The principal licensing agent for MPEG codec technology, MPEG LA, has sued Alcatel-Lucent in Delaware court.

Its claim is that Alcatel didn't have the right to absorb Lucent's IP portfolio -- which included patents on MPEG-2 technology -- into a new and separate trust, after Lucent had already made a commitment to provide that technology through MPEG LA.

The action could eventually have an effect on the royalty fees paid by content providers who use MPEG-2, most notably DVD and Blu-ray Disc. According to today's running tally maintained by HiDefDigest.com, 61% of the US' 197 Blu-ray titles are encoded using MPEG-2, versus a mere 2 MPEG-2 titles on HD DVD.

As This Week in Consumer Electronics magazine reported this morning, more than 1,300 license holders currently have paid access to MPEG LA's pool of technology, which should include the vital MPEG-2 patents. But Alcatel, MPEG LA claims, violated that trust by attempting to license MPEG-2 under a separate agreement with content providers - an agreement which would entail an added royalties tier.

"The only purpose of the transfer was to avoid Alcatel's contractual commitment in order to extract additional royalties from MPEG-2 patent pool licensees," reads a statement yesterday afternoon from MPEG LA. In fact, by having transferred the ownership rights for Lucent's patent pool into the trust, Alcatel may have effectively thrown the license status of all MPEG LA's rights holders to MPEG-2 technology in doubt.

Alcatel obviously did have interest in recouping the cost of acquiring Lucent through exploiting the defensibility of its patent portfolio. Last May, the company might have managed to reclaim those costs in one suit alone, had a $1.5 billion verdict in its favor against Microsoft on an MP3 infringement claim not been struck down in August.

Resolving this latest issue may take some time, and in the meantime, MPEG LA's customers may want to strongly consider that switch to MPEG-4 or VC-1 that's been hanging over their heads.