Introduction

Today, more than 38.6 million people are suffering from AIDS. In 2005, AIDS killed more than 3 million people. One third of those killed lived in sub-Saharan Africa. [3] In an attempt to garner such much needed economic stimulation and improve trade relations with the developed world, most sub-Saharan African nations have joined the World Trade Organization, an offshoot of the United Nations. One of the qualifications for membership in the WTO, is ratification of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPS requires member nations "to make patents available for any inventions, whether products or processes, in all fields of technology without discrimination, subject to the normal tests of novelty, inventiveness and industrial applicability."[1]

Drug Patents

One major consequence of this agreement is that these countries must honor patents covering anti-retroviral (ARV) drugs used for the treatment of AIDS. Unfortunately, the pharmaceutical companies who own the patents on these drugs have found it most profitable to sell a relatively small number of their drugs at a large premium in the developed world. Consequently, patients in developing countries are often denied treatment because they cannot afford to purchase drugs at first world prices and the monopoly protection granted by these patents precludes the production of generic alternatives. If such generic alternatives were availble at a reasonable price, the impact would be enormous. In the United States, ARV drugs have reduced the AIDS mortality rate by 75% in three years.[2]

Compulsory Licensing

In response to pressure from AIDS afflicted nations and human rights groups, several large pharmaceutical companies dramatically reduced prices on patented ARV drugs in May 2000. However no drugs were actually sold until October and it was found that even these reduced prices were much more than what most nations could afford.[2] In an attempt to make generic drugs available, several countries began to issue "compulsory" patent licenses. TRIPs permits these licenses to be issued without consent of the patent holder in situations of "national crisis". The Pharmaceutical industry responded by intensifying their lobbying efforts in the US and EU. At the behest of the industry, the US made several attempts to strongarm South Africa and Thailand into agreements that would curtail compulsory drug licenses. At one point South Africa and Thailand were even placed on the US trade sanctions "watch list."[4]

Doha Declaration

Finally in November of 2001, the WTO released the Doha declaration to remedy the compulsory licensing situation. The Doha declaration clarifies parts of the TRIPS agreement to give countries more power to issue compulsory patent licenses in emergency situations. Under this declaration, sub-Saharan African nations were reassured of their ability to issue compulsory licenses for ARV drug patents so that generic alternatives could be made available.[4]

FTAA and TRIPS-plus

However, the battle between intellectual property holders and AIDS afflicted nations wages on. Lobbyist pressure has caused the US to continue to pursue more restrictive AIDS patent licensing measures in more recent agreements such as the US-Jordan Free Trade Agreement and the Latin American Free Trade Agreement of the Americas. Meanwhile, Brazil has demonstrated the promise of generic ARV drugs. AIDS infection rates have been reduced to 1995 levels and the cost of ARVs have been reduced by up to 80% over their patented equivalents.[2]

The MP3 Format

MPEG-1 Audio Layer 3 (MP3) is the predominant compressed audio format representing 88% of all digital music on the internet.[7] MP3 is a so-called "lossy" compression format in that it discards some information present in the original material in order to reduce file size. It uses a psycho-acoustic model of human hearing to determine which sounds are audible and which are "masked"---and can be eliminated. This mechanism enables a file size reduction of 7-12 times[2] versus the 1-2 times possible with lossless compression techniques[1].

The MP3 format was developed starting in 1987 by the Fraunhofer Institute and Thomson Consumer Electronics. Several patents were also filed in 1987 covering various techniques and algorithms used in the MP3 format. Later in 1992, MP3 became an official part of the Motion Picture Experts Group (MPEG) standard. This standardization process enabled the format to take off in the late 1990s as Napster and the filesharing movement embraced MP3 as the compressed audio format of choice.[3]

Blissful Ignorance

As the popularity of the format exploded, many free and commercial MP3 encoders and decoders were created. Most codec implementers did not realize that MP3 compression was covered by patents and assumed the algorithms could be freely duplicated. This misconception was partially due the fact that MP3 was an MPEG standard (and therefore assumed to be free) and also due to the fact that none of the MP3 patents were enforced prior to 1998. Furthermore, in the early 1990s software patent issues hadn't yet become the issue they are today.

Da dum... Patents!

In September of 1998 everything changed. Fraunhofer sent letters to authors of MP3 software and manufacturers of MP3 players notifying them that MP3 was in fact patented and demanding royalties. While some manufacturers purchased licenses, software developers initiated a major effort to develop alternative audio compression formats. Microsoft began pushing its Windows Media Audio (WMA) format, while the open source community largely stopped distributing MP3 compression software and focused on its new Ogg Vorbis codec. This sudden patent enforcement fragmented the industry and stunted the growth of the MP3 format.[3]

Recent MP3 Lawsuits

Patents surrounding MP3 are still making the news today. In an ironic twist of fate in 2005, a company called Audio MPEG sued the Fraunhofer Institue, claiming that the MP3 codec infringed on some of their patents. This case was settled out of court but another company has recently taken to the offensive again.[2] In September 2006, an Italian company called Sisvel had German police seize MP3 players from player manufacturer Samsung's trade show booth. The company obtained an injunction blocking the sale of the players. This injunction was later reversed by a German judge but then another judge blocked the reversal on the same day. This prompted online news sites to quip that "the patent Wild West has come to Germany."[6]

The MP3 fallout

Fraunhofer's sudden enforcement of a previously overlooked patent brought patents squarely into the consciousness of software and technology developers. Companies like Microsoft have gone out of their way to create their own formats to avoid potential IP conflicts. Open source projects like the linux kernel have instituted a sign off system where all contributions must have clear authorship and a single individual takes responsibility for making sure that section of code is "clean". Large companies such as IBM, Microsoft and Intel amass huge patent portfolio as a sort of defensive countermeasure. Today, patents are much like the mutually assured destruction principle of the Cold War. If a company sues IBM for infringement, IBM will look at its 40,000 active patents[5] to find a few that the suing company infringes upon. It will then countersue and eventually a settlement will be reached, usually out of court. The real losers in this system are small companies and individuals as Bill Gates explains:[4]

"If people had understood how patents would be granted when most of today's ideas were invented and had taken out patents, the industry would be at a complete standstill today...The solution is patenting as much as we can. A future startup with no patents of its own will be forced to pay whatever price the giants choose to impose. That price might be high. Established companies have an interest in excluding future competitors." [source]