The MPEG LA and its member patent holders have announced their agreement on final licensing terms for the MPEG-4 Visual Patent Portfolio License, MPEG-4 Systems (without MPEG-J) Patent Portfolio License and MPEG-J Patent Portfolio License. The official licenses for the MPEG-4 Patent Portfolio are scheduled to roll out beginning this September.
After taking into consideration the views, interests and concerns of prospective licensees, the organization and its member patent holders have decided that not only will the MPEG-4 Visual Patent Portfolio License Agreement cover the Simple and Core profiles of the Visual standard as previously announced, but will also cover all other current MPEG-4 Visual standard profiles. Those parties who elect to sign the license agreement within six months of its first offering six months will not be required to pay royalties on licensed products sold between January 1, 2000 (the effective date of the license) and December 31, 2003.
'By affording access to patents that are essential not only to the Simple and Core profiles but also to additional MPEG-4 Visual profiles without additional royalties, the MPEG-4 Visual Patent Portfolio License provides convenience to the marketplace and adapts seamlessly to marketplace change,' commented MPEG LA CEO Baryn S. Futa in a prepared statement. 'It tells users they are welcome here for the long haul as the technology develops and applications migrate to other MPEG-4 Visual profiles.'
To enhance the widespread use of MPEG-4 Visual technology across various business models, the patent holders have agreed to adopt 'reasonable' annual limitations on certain royalties in order to provide customers more cost predictability. The licensing models will also feature royalty options that require no royalty reports. The MPEG LA has also established threshold levels below which certain use-based royalties would not be charged to encourage early-stage users to adopt MPEG-4 Visual technology. In addition, the licensing agreement includes alternative royalty options to accommodate the needs of various business models.
A Favorable Response
The MPEG-4 Industry Forum (M4IF) responded favorably to the MPEG LA's announcement of licensing term revisions. Although M4IF President Rob Koenen believes that the viability of the license still needs to be proven in the marketplace, he says that its usage fee concerns have been substantially addressed by the MPEG LA's revisions.
'I am delighted that terms are finally known,' said Koenen. 'This sounds the starting bell for the whole broadcast and multimedia industry to start releasing MPEG-4 products and services. The licenses are the long-expected prerequisite for MPEG-4 being fully accepted and deployed.'
'We now have version 1.0 of the product, which is great. It does not yet cover all the requirements, but I am confident that MPEG LA and the licensors will work with potential licensees, as they have done to date, to come with a version 2 license that covers more services and usage models,' said Koenen. The MPEG-4 industry needs a license that allows competitive products to be offered in all of MPEG-4's target markets, consistent with the opportunity presented MPEG-4 as a truly horizontal, cross-platform standard. Although there is no single, comprehensive, open alternative for all markets, there are alternatives in each of them.
Licensing Details
The MPEG-4 Visual Patent Portfolio License applies three models to three separate business environments. Manufacturers of products for cable TV, satellite TV and over-the-air broadcast applications will pay a royalty of US $0.25 for the right to manufacture and sell each decoder and encoder, subject to annual caps per legal entity. Cable and satellite TV content providers will pay a royalty of US $1.25 for the right to use a decoder to decode and use encoded MPEG-4 Visual information.
The manufacturers of decoders and/or encoders who offers Internet or mobile products for sale or distribution will pay US $0.25 per activated decoder and/or encoder subject to an annual cap per legal entity of $1,000,000 for decoders and $1,000,000 for encoders. However, the will be no royalty charged for the first 50,000 decoders and 50,000 encoders that are sold or distributed in any calendar year.
Internet and wireless mobile content providers can either choose to pay a flat rate of $0.25 per subscriber per year or $0.000333 per minute of MPEG-4 video used, with either option subject to an annual cap of $1,000,000 per legal entity. Alternatively the content provider may elect to pay a flat annual fee of $1,000,000 with no royalty reporting obligation. In addition, no royalty is payable on the first 50,000 subscribers during any one calendar year.
With regards to advertiser supported services or any other content provider that does not receive direct payments from subscribers, the MPEG LA says that it will work directly with Licensees to come up with a consistent method of counting subscribers that will accommodate the specific business models of the customer.
Replicators and content providers specializing in Stored Video will either pay $0.01 per 30 minutes or a maximum of $0.04 per movie. For content that is more than five years old, the provider shall pay $0.005 per 30 minutes or a maximum of US $0.02 per movie. Providers of stored video that is 12 minutes in length or less, the royalty fee will be $0.002.
The initial term of the license will run through Dec. 31, 2008, and will be renewable on what the MPEG LA characterizes as reasonable terms and conditions throughout the useful life of any Portfolio patent with rate protection for similar license grants, subject to MPEG LA's right to change terms to meet changing market conditions.
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