

Nero AG opens antitrust case against MPEG LA - bitboxer
http://www.scribd.com/full/31797838?access_key=key-2d85ozi4e9l7c1vh9rhb
(via zedshaw)
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ck2
Original PDF source:

<http://www.courthousenews.com/2010/05/17/Antitrust.pdf>

But is this from January? [http://dockets.justia.com/docket/court-
cacdce/case_no-2:2010...](http://dockets.justia.com/docket/court-
cacdce/case_no-2:2010cv00382/case_id-463131/)

dupe? <http://news.ycombinator.com/item?id=1371983>

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fizx
Yet another time I wish HN had a Batman spotlight we could shine into the sky
to get grellas to analyze something. ;)

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grellas
When you cut past the surface elements here, this antitrust counterclaim does
appear to be as much a form of aggressive defense to a contract claim being
asserted by MPEG LA against Nero as it does a legitimate claim that Nero
believes it can win.

Nero complains that it used term-limited free trials for its software and that
MPEG LA went for years counting this as a sale and a return (once the free
trial expired and the customer did not buy), only to shift its policy in its
written license agreements in 2008 and begin to count this type of situation
as a sale without a return. Thus, under the new policy concerning term-limited
free trials, Nero incurred liabilities for royalties and got no credit for
returns. When audited by MPEG LA, Nero was found to owe some $12 million plus
interest, or over $15 million total to MPEG LA for unpaid royalties.

MPEG LA sued to collect the unpaid royalties and, in response, NERO filed this
counterclaim alleging abuse of monopoly power by MPEG LA under section 2 of
the Sherman Act.

Under section 2 of the Sherman Act, a party holding monopoly power incurs
liability if it intentionally dominates its market through some form of
misconduct (e.g., price discrimination). Of course, no misconduct exists
simply from the fact that one of MPEG LA's licensees breaches its obligation
to pay royalties. And it does seem pretty much undisputed the Nero did fail to
pay the royalties claimed here. Nero argues essentially that it received
verbal and other assurances that effectively modified what the license
agreements said on their face and that it does not therefore owe the
royalties. However, it mentions that MPEG LA is hiding behind the parol
evidence rule, which is a rule of law that forbids admission into evidence of
statements extrinsic to a contract that contradict its express and unambiguous
term. That is, Nero is trying to say that it is not bound by what the
contracts say because MPEG LA gave it assurances to the contrary of the
express contract language, and, of course, such assurances normally are not
admissible into evidence - meaning that Nero is probably stuck.

As a result, Nero is putting up an aggressive defense trying to cast doubt on
the whole patent pool licensing structure by which MPEG LA functions. The
theory of its antitrust case is essentially that the Department of Justice
initially expressed concerns about how MPEG LA might misuse its monopoly power
and only gave clearance for the MPEG-2 patent pool based on the express
conditions that MPEG LA would have the portfolio reviewed continually by an
independent expert to ensure that it contained only _essential_ patents, that
it would be fair in its royalty pricing, and that it would not discriminate
among licensees on terms and pricing. The DOJ reserved its rights to file an
antitrust enforcement action in the event such conditions were not met. Nero
alleges that MPEG LA has violated all of these conditions by using its own
company lawyer as the person who reviews the portfolio, by loading the
portfolio with many hundreds of non-essential patents whose inclusion is for
the illegal purpose of extending its monopoly control over the MPEG standards
long beyond the period after which the initial patents were to have expired,
and also by discriminating among licensees in terms and pricing (giving
favorable terms to licensors who hold patents in the pool while dinging others
such as Nero). As a result, Nero alleges that MPEG LA is illegally using its
monopoly power under Sherman Act section 2 and should be enjoined from
continuing to enforce its patents.

It is hard to evaluate the merits of this claim except to say that the
circumstances of the case make one doubt that the claim will be likely to
stick. It was raised after-the-fact as part of an attempt to defend what
otherwise appears indefensible. Moreover, if the DOJ feels its conditions have
been violated, it is the proper entity to bring enforcement action and, at
least to date, it has not done so. Finally realities tend to prevail in the
law and the chaos that would ensue from a court enjoining MPEG LA from being
able to administer its patent pool would be great - and no court will do this
unless there are hugely compelling reasons to do so. Thus, Nero would seem to
have quite a significant burden of proof to meet here to get a court to invoke
such a harsh remedy. In theory, it might do so but it would seem to be a very
uphill fight.

Note: I am not an antitrust lawyer and may be missing nuances here but these
are my observations derived largely from a reading of the counterclaim. Don't
know that any of this gives special insight but this is my best shot.

~~~
njl
Thank you!

So this is more a desperate legal maneuver by a company that was stuck with
some dreadful license terms, and less a potential serious shellacking of MPEG
LA. That disappoints me.

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jmillikin
Is there a PDF link available? Scribd is terribly annoying, and the "Download"
link is greyed out.

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andrewljohnson
It's ironic that now that Scribd is no longer PDFs, people want the content in
PDF form.

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w1ntermute
HTML > PDF > Flash

This document isn't available in HTML (I guess Scribd hasn't gotten around to
converting everything), so PDF is the next best option.

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i80and
It isn't?
[http://www.scribd.com/doc/31797838/Untitled?secret_password=...](http://www.scribd.com/doc/31797838/Untitled?secret_password=17m2t7ojfvxhhht8tv5j)

Also seems to have a download link.

~~~
w1ntermute
That's not HTML, it's a bunch of JPEG files, one per page.

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danbmil99
Blast from the past: On2 complains MPEG-4 patent pool violates antitrust laws:
<http://www.itworld.com/020411mpeg4>

~~~
ZeroGravitas
That's from the time that the whole web industry, including Apple, was
fighting against the MPEG-LA terms. Something I find amusing every time I hear
it claimed that they'd never do anything crazy with web licence rates in 5
years time.

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_delirium
FWIW, here's an article with a tiny bit of context and background, and the
expected response from an MPEG-LA attorney:
[http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202458503025&...](http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202458503025&MPEG_LA_Shrugs_Off_Antitrust_Allegations)

