To Infinity and Beyond: MPEG LA Extends H.264 Internet Video Moratorium Indefinitely

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An inflection point has been reached in the online video industry: MPEG LA, the licensing association that holds patent pools as diverse as AVC, MPEG-2, and VC-1, has announced that it is lengthening the moratorium on royalties for AVC-based video distributed via the Internet.

"MPEG LA announced today that its AVC Patent Portfolio License will continue not to charge royalties for Internet Video that is free to end users (known as "Internet Broadcast AVC Video") during the entire life of this License," the company announced in a press release.

While this move had been anticipated since MPEG LA's February 2010 announcement that it would not charge royalties until December 31, 2015 for such video, the rapid decision to indefinitely suspend royalties-less than seven months after the initial announcement-is somewhat of a surprise.

To reiterate the point, MPEG LA notes what's changed and what hasn't changed.

"Today's announcement makes clear that royalties will continue not to be charged for such video beyond that time," the press release noted, adding that "products and services other than Internet Broadcast AVC Video continue to be royalty-bearing."

The distinction in internet broadcast AVC Video is key to continued patent royalties. MPEG LA splits the H.264 license portfolio into two sub-licenses, one for manufacturers of encoders or decoders and the other for distribution of content.

The biggest uncertainty on royalties has always come from the distribution side. The distribution sublicense further splits in to four key subcategories, two of which (subscription and title-by-title purchase or paid use) are tied to whether the end user pays directly for video services, and two of which ("free" television and internet broadcast) are tied to remuneration from sources other than the end viewer. 

Today's announcement, then, covers only one of the four distribution sublicenses.

A Reaction to WebM?
While the decision to suspend royalties on Internet Broadcast AVC Video until the end of 2015 came prior to Google's implementation of WebM via the former On2 VP8 codec, there is little doubt that the most recent announcement by MPEG LA is, in part, a counteraction against the potential inroads that WebM may make in the online video space.

MPEG LA itself, during the early licensing uncertainty surrounding WebM and Google's release of VP8, posited that a patent pool could be considered around VP8.

"In view of the marketplace uncertainties regarding patent licensing needs for [VP8]," said MPEG LA CEO Larry Horn in late May, "there have been expressions of interest from the market urging us to facilitate formation of licenses that would address the market's need for a convenient one-stop marketplace alternative to negotiating separate licenses with individual patent holders in accessing essential patent rights for VP8 as well as other codecs, and we are looking into the prospects of doing so."

Google quickly squashed hopes for a patent pool by modifying its open-source license to be fully BSD compliant, and today's announcement by MPEG LA appears to be the first move towards maintaining AVC's dominancy.

It's also worth noting that MPEG LA holds the patent portfolio for VC-1, the SMPTE standard surrounding what once was Microsoft's WindowsMedia 9 Advanced codec.

That patent portfolio also has a similar moratorium through 2013, but it may also need to be revisited, in light of today's announcement. The one major difference, however, is the current VC-1 moratorium also covers content that is being sold or as part of a subscription basis, for which AVC royalties would already apply.

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