Licensing and patent issues
Thomson Consumer Electronics controls licensing of the MPEG-1/2 Layer 3 patents in countries that recognize software patents, including the United States and Japan, but not EU countries. Thomson has been actively enforcing these patents. Thomson has been granted software patents in EU countries and by the European Patent Office [1], but it is unclear whether or not they would be enforced by courts there. See Software patents under the European Patent Convention.
For current information about Thomson's patent portfolio and licensing terms and fees see their website mp3licensing.com.
In September 1998, the Fraunhofer Institute sent a letter to several developers of MP3 software stating that a license was required to "distribute and/or sell decoders and/or encoders". The letter claimed that unlicensed products "infringe the patent rights of Fraunhofer and THOMSON. To make, sell and/or distribute products using the [MPEG Layer-3] standard and thus our patents, you need to obtain a license under these patents from us."
These patent issues significantly slowed the development of unlicensed MP3 software and led to increased focus on creating and popularizing alternatives such as WMA and Ogg Vorbis. Microsoft, the makers of the Windows operating system, chose to move away from MP3 to their own proprietary Windows Media formats to avoid the licensing issues associated with the patents. Until the key patents expire, open source / free software encoders and players appear to be illegal in countries that recognize software patents.
In spite of the patent restrictions, the perpetuation of the MP3 format continues; the reasons for this appear to be the network effects caused by:
[*] familiarity with the format, not knowing alternatives exist,
[*] the fact that these alternatives do not universally provide a definite advantage over MP3,
[*] the large quantity of music now available in the MP3 format,
[*] the wide variety of existing software and hardware that takes advantage of the file format,
[*] the lack of DRM-protection technology, which makes MP3 files easy to edit, copy and distribute over networks,
[*] the majority of home users not knowing or not caring about the software patent controversy, which is in general irrelevant to their choice of the MP3 format for personal use.
Additionally, patent holders declined to enforce license fees on open source decoders, allowing many free MP3 decoders to develop. Furthermore, while attempts have been made to discourage distribution of encoder binaries, Thomson has stated that individuals using free MP3 encoders are not required to pay fees. Thus while patent fees have been an issue for companies attempting to use MP3, they have not meaningfully impacted users, allowing the format to grow in popularity.
Sisvel S.p.A. [2] and its US subsidiary Audio MPEG, Inc. [3] previously sued Thomson for patent infringement on MP3 technology[4], but those disputes were resolved in November 2005 with Sisvel granting Thomson an MP3 license. Motorola also recently signed with Audio MPEG to license MP3. With Thomson and Sisvel both owning separate patents which they claim are needed by the codec, the legal status of MP3 remains unclear.
The Fraunhofer patents expire April 2010, at which time MP3 algorithms become public domain.
