No it wasn't. There was arithmetic encoding option, which was owned and patented by IBM and was not royalty-free. As result everyone implementing codecs had to stick with less efficient, but free Huffman encoding.

Interesting, so that amends my statement to:

Baseline profile JPEG was specifically created to be a royalty-free standard. JPEG-arithmetic is the more advanced optional extension to the format with patent royalties that no-one uses on the web for that very reason.

(Though to be fair to IBM, though the situation appears vaguer than I'd like, it seems they were happy to licence their patents royalty-free, but other companies that also held patents weren't: http://en.wikipedia.org/wiki/Arithmetic_coding#US_patents_on...)

Afaict jpeg, despite it's intentions, has still been dogged by a number of expensive patent fights.

hmm. I think you might be thinking of PNG, which to my memory was the codec developed as a response to patent issues.