diff --git a/desktop-client/chat_widgets.py b/desktop-client/chat_widgets.py
index 29a50b5..355e876 100644
--- a/desktop-client/chat_widgets.py
+++ b/desktop-client/chat_widgets.py
@@ -8,6 +8,7 @@ from PyQt6.QtCore import Qt, pyqtSignal
 class ChatBubble(QWidget):
     def __init__(self, author, text, time_str, is_self, on_link_clicked):
         super().__init__()
+        self.setSizePolicy(QSizePolicy.Policy.Expanding, QSizePolicy.Policy.Fixed)
         layout = QHBoxLayout(self)
         layout.setContentsMargins(5, 2, 5, 2)
         
@@ -39,6 +40,7 @@ class ChatBubble(QWidget):
         
         # Author
         author_lbl = QLabel("You" if is_self else author)
+        author_lbl.setTextFormat(Qt.TextFormat.PlainText)
         author_lbl.setStyleSheet(f"color: {author_color}; font-weight: bold; font-size: 11px; background: transparent;")
         bubble_layout.addWidget(author_lbl)
         
@@ -47,6 +49,7 @@ class ChatBubble(QWidget):
         # width of 0 lets the label wrap within whatever space the bubble
         # actually receives rather than expanding the bubble outward.
         self.text_lbl = QLabel(text)
+        self.text_lbl.setTextFormat(Qt.TextFormat.RichText)
         self.text_lbl.setWordWrap(True)
         self.text_lbl.setMinimumWidth(0)
         self.text_lbl.setSizePolicy(
@@ -71,6 +74,14 @@ class ChatBubble(QWidget):
             layout.addWidget(self.bubble)
             layout.addStretch()
 
+    def resizeEvent(self, event):
+        super().resizeEvent(event)
+        # Recalculate after the scrollbar or splitter changes the available width.
+        # A fixed row height prevents the scroll layout squeezing wrapped text.
+        height = self.layout().heightForWidth(event.size().width())
+        if height >= 0:
+            self.setFixedHeight(height)
+
 
 class SystemMessageWidget(QWidget):
     def __init__(self, text):
diff --git a/desktop-client/room_widget.py b/desktop-client/room_widget.py
index a93c8ad..dddbecc 100644
--- a/desktop-client/room_widget.py
+++ b/desktop-client/room_widget.py
@@ -45,6 +45,8 @@ class RoomWidget(QWidget):
         self.popout_window = None
         
         self._setup_ui()
+        self._unread_messages = 0
+        QApplication.instance().focusChanged.connect(self._on_chat_focus_changed)
         
     def _setup_ui(self):
         layout = QVBoxLayout(self)
@@ -174,7 +176,7 @@ class RoomWidget(QWidget):
         self.chat_container.setMaximumWidth(500)
         chat_layout = QVBoxLayout(self.chat_container)
         
-        chat_header = QLabel("Live Chat")
+        chat_header = self.chat_header = QLabel("Live Chat")
         chat_header.setObjectName("chatHeader")
         
         self.popout_btn = QPushButton("↗")
@@ -323,6 +325,7 @@ class RoomWidget(QWidget):
         self.room_file_badge.setText(f"📄 {file_name}")
         
         # Clear chat
+        self._clear_chat_alert()
         for i in reversed(range(self.chat_content_layout.count())):
             self.chat_content_layout.itemAt(i).widget().setParent(None)
         
@@ -335,6 +338,7 @@ class RoomWidget(QWidget):
             self.vlc_player.set_volume(self.volume_slider.value())
             
     def cleanup(self):
+        self._clear_chat_alert()
         self.vlc_player.stop()
         self.current_users = []
         self._is_first_user_update = True
@@ -723,13 +727,20 @@ class RoomWidget(QWidget):
         time_str = dt.strftime("%I:%M %p")
         
         safe_text = html.escape(text)
-        safe_author = html.escape(author)
-        
+
         # Regex to find timestamps like 1:23 or 01:23:45
         pattern = r'\b(\d{1,2}:\d{2}(?::\d{2})?)\b'
         linked_text = re.sub(pattern, r'<a href="seek:\1" style="color: #66b3ff; text-decoration: none;">\1</a>', safe_text)
+        linked_text = linked_text.replace('\n', '<br>')
         
         is_self = author == self.username
+        if not is_self and not self._chat_has_focus():
+            self._unread_messages += 1
+            self.chat_header.setText(f"Live Chat • {self._unread_messages} new")
+            self.chat_toggle_btn.setText("💬•")
+            self.chat_toggle_btn.setToolTip(f"{self._unread_messages} new chat messages")
+            self.chat_toggle_btn.setStyleSheet("color: #66b3ff; border: 1px solid #66b3ff; border-radius: 6px;")
+            QApplication.alert(self.chat_container.window(), 3000)
         
         # Auto-extract tags added by users directly via /tag command
         # We look for the pattern generated by /tag: "MM:SS tag text"
@@ -742,6 +753,24 @@ class RoomWidget(QWidget):
         bubble = ChatBubble(author, linked_text, time_str, is_self, self._handle_link_from_bubble)
         self.chat_content_layout.addWidget(bubble)
         self._scroll_to_bottom()
+
+    def _chat_has_focus(self):
+        focus = QApplication.focusWidget()
+        return (self.chat_container.isVisible()
+                and self.chat_container.window().isActiveWindow()
+                and focus is not None
+                and (focus is self.chat_container or self.chat_container.isAncestorOf(focus)))
+
+    def _on_chat_focus_changed(self, old, new):
+        if self._chat_has_focus():
+            self._clear_chat_alert()
+
+    def _clear_chat_alert(self):
+        self._unread_messages = 0
+        self.chat_header.setText("Live Chat")
+        self.chat_toggle_btn.setText("💬")
+        self.chat_toggle_btn.setToolTip("Toggle Chat")
+        self.chat_toggle_btn.setStyleSheet("")
         
     def _handle_link_from_bubble(self, url_str):
         if url_str.startswith("seek:"):
@@ -782,6 +811,7 @@ class RoomWidget(QWidget):
         self._scroll_to_bottom()
 
     def clear_chat(self):
+        self._clear_chat_alert()
         for i in reversed(range(self.chat_content_layout.count())):
             item = self.chat_content_layout.itemAt(i)
             if item.widget():
diff --git a/desktop-client/test_chat.py b/desktop-client/test_chat.py
new file mode 100644
index 0000000..324e589
--- /dev/null
+++ b/desktop-client/test_chat.py
@@ -0,0 +1,103 @@
+from unittest.mock import Mock
+
+import pytest
+from PyQt6.QtCore import QObject, pyqtSignal
+from PyQt6.QtGui import QTextDocument
+from PyQt6.QtWidgets import QApplication
+
+import room_widget
+
+
+class PlayerSignals(QObject):
+    time_changed = pyqtSignal(int)
+    state_changed = pyqtSignal(bool, int)
+
+
+@pytest.fixture
+def room(qtbot, monkeypatch):
+    player = Mock(signals=PlayerSignals())
+    monkeypatch.setattr(room_widget, 'VLCSyncPlayer', lambda frame: player)
+    widget = room_widget.RoomWidget()
+    widget.username = 'Me'
+    qtbot.addWidget(widget)
+    widget.resize(1050, 500)
+    widget.show()
+    return widget
+
+
+@pytest.mark.parametrize('text', ["It's someone's & my <message>",
+                                  "It's at 1:23 & <b>literal</b>",
+                                  'line one\nline two', 'literal &#39; entity'])
+def test_message_rendering(room, text):
+    room.add_chat_message("<b>O'Brien</b>", text, 0)
+    bubble = room.chat_content_layout.itemAt(0).widget()
+    doc = QTextDocument()
+    doc.setHtml(bubble.text_lbl.text())
+    assert doc.toPlainText() == text
+    if '1:23' in text:
+        assert 'href="seek:1:23"' in bubble.text_lbl.text()
+
+
+def test_bubbles_do_not_shrink_or_clip_when_overflowing(room, qtbot):
+    text = 'A wrapped message with several words. ' * 8
+    room.add_chat_message('Other', text, 0)
+    qtbot.wait(100)
+    first = room.chat_content_layout.itemAt(0).widget()
+    initial_height = first.height()
+    for i in range(35):
+        room.add_chat_message('Me' if i % 2 else 'Other', text, 0)
+    qtbot.wait(200)
+    assert room.chat_messages.verticalScrollBar().maximum() > 0
+    assert first.height() >= initial_height
+    for width in (220, 450, 280):
+        room.splitter.setSizes([room.width() - width, width])
+        qtbot.wait(100)
+        for i in range(room.chat_content_layout.count()):
+            bubble = room.chat_content_layout.itemAt(i).widget()
+            label = bubble.text_lbl
+            assert label.height() >= label.heightForWidth(label.width())
+            assert bubble.bubble.rect().contains(label.geometry())
+
+
+def test_unread_alert_and_focus_clear(room, qtbot, monkeypatch):
+    alert = Mock()
+    monkeypatch.setattr(QApplication, 'alert', alert)
+    room.activateWindow()
+    room.setFocus()
+    qtbot.wait(50)
+    room.add_chat_message('Other', 'hello', 0)
+    assert room._unread_messages == 1
+    alert.assert_called_once()
+    room.add_chat_message('Me', 'reply', 0)
+    assert room._unread_messages == 1
+    room.chat_input.setFocus()
+    qtbot.wait(50)
+    assert room._unread_messages == 0
+    room.add_chat_message('Other', 'focused', 0)
+    assert room._unread_messages == 0
+    room.chat_container.hide()
+    room.add_chat_message('Other', 'hidden', 0)
+    assert room._unread_messages == 1
+    room.clear_chat()
+    assert room._unread_messages == 0
+
+
+def test_popout_focus_and_wrapping(room, qtbot, monkeypatch):
+    monkeypatch.setattr(QApplication, 'alert', Mock())
+    room.popout_chat()
+    popout = room.popout_window
+    qtbot.addWidget(popout)
+    popout.activateWindow()
+    room.chat_input.setFocus()
+    qtbot.wait(100)
+    room.add_chat_message('Other', 'Wrapped popout text ' * 40, 0)
+    qtbot.wait(100)
+    assert room._unread_messages == 0
+    bubble = room.chat_content_layout.itemAt(0).widget()
+    assert bubble.text_lbl.height() >= bubble.text_lbl.heightForWidth(bubble.text_lbl.width())
+    room.activateWindow()
+    room.setFocus()
+    qtbot.wait(100)
+    room.add_chat_message('Other', 'Background popout', 0)
+    assert room._unread_messages == 1
+    popout.close()