MPEG-4 Licensing Fees: MPEG-LA Reponds

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Date: Friday, February 22nd, 2002, 10:51
Category: Archive

If you responded to Apple’s criticism of MPEG-4 licensing fees for content owners, you may have gotten a response like this one from Larry Horn, VP, Licensing, MPEG-4 Licensing group. Thankfully, MPEG-LA put together a thoughtful response, and this information is interesting: if your content is free, you are not subject to license fees as a content provider. MPEG-LA also stresses that the licensing terms were just announced Jan. 31, and that the parties involved may change those terms — though the process of discussion could take months. Click read more for the full letter from MPEG-LA.

Thank you for your thoughtful note regarding the reported MPEG-4 Visual licensing terms. We appreciate you taking the time to share your views with us and your interest in using the MPEG-4 Visual Standard. As you might imagine, not all of the messages we received have been so thoughtful :-). I know this email may sound like a canned response, but since you took the time to write to us and others who wrote us raised similar concerns, we wanted to get back to you (and the others) to explain the situation. We understand that you have strong feelings about the MPEG-4 Visual licensing terms based on what you’ve heard, and we welcome your feedback. The license agreement is still in the process of being worked out, your views are important to us, and they will be taken into consideration. Similarly, I hope you will allow us this opportunity to clarify a few things that may have been misunderstood and to explain where this goes from here.

First, we would like to clarify the role of MPEG LA. MPEG LA’s business is to make it possible for new technologies (like MPEG-4 Video) to enter the marketplace by making the essential intellectual property rights owned by many patent owners accessible to everyone on fair, reasonable, nondiscriminatory terms under a single license. If there were no MPEG LA, the essential patent rights that made the MPEG-4 Visual technology possible would still have to be dealt with, but instead of having the opportunity to deal with one company for a single license that includes those rights, users’ only option would be to deal with each patent holder individually. With MPEG LA, the marketplace is assured of ready access to MPEG-4 Visual essential patents owned by 18 different companies (soon there will be more, but our goal is to include as many essential patents as possible in one license; therefore, royalty rates will not increase during the term of the agreement even as new patent owners and more patents are included). What you’ve seen is the first step in that process.

We understand that the success of a licensing program relies on the success of the underlying technology. Therefore, our goal, like yours, is to promote the widest possible use of the MPEG-4 Visual standard, and we are sensitive to the need to structure a reasonable license that is consistent with marketplace conditions. To that end, we continue to work with the patent owners to assure that the license is responsive. Everything is in a state of constant review. If something isn’t right, every effort is made to fix it. Because of MPEG LA’s role, you have the opportunity to discuss your concerns with us, and we in turn can communicate them to the patent owners. We note that there are many different views to be considered, however, and that ultimately the marketplace will decide. We note also that there may be many reasons (having nothing to do with licensing terms) why someone may delay a product introduction or choose among competing alternatives. And, it would be a mistake to assume that any alternative is or will be free of patent licensing obligations or without additional charges of its own. Finally, we understand that you do not agree with the implementation of a use fee. Given the nature of MPEG-4 Visual technology and the importance of encouraging the wide availability of MPEG-4 Visual decoders and encoders in the market, the patent owners’ intention was that reasonable royalties should be shared among industry participants across the entire product chain and applies equally to both wired and wireless services (especially as the ability to distinguish between them disappears). The philosophy underlying the use fee was intended to be consistent with the expected flow of MPEG-4 video transactions so that those who can pay will and those who can’t aren’t expected to: thus, the use royalties to be paid by service providers are tied to remuneration - if service providers or content providers are paid for offering or providing MPEG-4 video, then patent holders are paid for the use of their patents; if service providers or content providers are not paid for offering or providing MPEG-4 video, then patent owners are not paid for the use of their patents. The entire license including the use fee, its application to broadcast/cablecast/multichannel environments, etc., is under study and will be the subject of further discussion. This is just the beginning. The licensing terms were just announced on January 31, and the details of the MPEG-4 Visual license agreement are still being worked out. Because of the challenge posed by the effort to produce a joint licensing program requiring a consensus among at least 18 different patent owners and the yet undetermined future implementations and applications of the emerging MPEG-4 Visual technology, this may take several months to complete. There will be much discussion before all of this is sorted out, and changes may be expected. Again, we appreciate your contribution to this process and will keep you informed.


Larry Horn
Vice President, Licensing

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