By Scott M. Fulton, III, Betanews
Prior to Google's announcement earlier today of its open sourcing the VP8 video codec, a spokesperson for MPEG LA -- the licensing agent that manages the patent portfolio for multimedia technologies relating to the H.264 codec, among others -- agreed to answer ten questions submitted to the agency in advance. Those questions regard how it licenses the codec that Microsoft and Apple consider the best solution for HTML 5, the next markup language for the Web.
Here, Betanews presents the questions and MPEG LA's responses without editorial comment.
1. One of the principal confusions we see people having, evidently, concerns the royalties process for non-commercial video. We know that MPEG LA does not charge royalties to the producers of videos encoded using H.264, for the non-commercial use of video made with cameras that use this codec, or through software that uses this codec. But royalties are paid, by someone, at some time, and perhaps people would have a better understanding of this process if they could comprehend who, when, and why. Because people evidently are under the impression that they will, at some time, owe a bill to MPEG LA; and the current conspiracy theory is that it will come due in 2015, which is the expiration date for the current royalty-free terms.
MPEG LA: Please permit me to provide some general background with respect to our AVC/H.264 ("AVC") License: The AVC License is effectively divided into two halves: (i) sublicenses granting the rights to "manufacture and sell" AVC Products and (ii) sublicenses granting the rights to "use" such AVC Products to provide AVC Video content for remuneration. An AVC Product is defined to be a product that contains one AVC decoder, one AVC encoder or a single product including a combination of the two (for example, hardware products, software products, etc.).
In the case of (i) sublicenses granting the rights to make and sell AVC Products, the party that offers the end products concludes the License and is responsible for the applicable royalties associated with the products they distribute. Included in the royalty paid by a Licensee for the manufacture and sale of AVC encoders/decoders is the limited right for a Consumer to use the encoders/decoders for their own personal use (for example, in a teleconference or to watch personal video content). But, when the encoders/decoders are used to provide AVC video content to an end user for remuneration, the provider of such video service may be responsible for a royalty for the right to use the encoders/decoders in connection with the remunerated video. Specifically, AVC Video offered on a Title-by-Title, Subscription, Free Television, or Internet Broadcast basis will benefit from coverage under the AVC License (the first three bear royalties; the fourth [Internet Broadcast] does not).
2. Has there ever been an instance in the history of the MPEG LA organization when an individual has been responsible for royalties for non-commercial use of technologies in its portfolio?
MPEG LA: Individuals are responsible when they make [or] provide video for remuneration of the type for which a license is required and a royalty is payable, but there has been no instance where a consumer or end user was pursued for a royalty.
3. Is it possible for any party to be held responsible in five years' time for the non-commercial use this year of technology in MPEG LA's portfolio?
MPEG LA: We assume that by "non-commercial use" you mean something such as a Web site that distributes AVC video content free to end users (which is referred to in our AVC License as "Internet Broadcast AVC Video"). While that Web site would benefit from being a Licensee to our AVC License, it does not pay a royalty for the distribution of such video through December 31, 2015. Decisions regarding royalties for the period after 2015 are considered near the end of the prior term when then current business models and related conditions can be taken into account.
4. If a Web site were to charge subscription fees for up-front access to its content, and among that content happened to be links to, or embedded streams of, videos that were created using H.264 for which there appeared to be no commercial intent at the time of creation, is anyone responsible for royalties? The producer, the Web site, the viewer? (For example, say The Wall Street Journal under a paywall was to host an H.264 video that it presents as having been independently produced, and the paywall pertains to the site as a whole.)
MPEG LA: Yes, since the Web site is receiving remuneration for the AVC video content it makes available on a subscription basis, it would benefit from the coverage our AVC License provides. The amount of royalties owed, if any, would depend on the number of Subscribers to that website during a calendar year: 100,000 or fewer subscribers/year = no royalty; 100,001 - 250,000 subscribers/year = $25,000; 250,001 - 500,000 subscribers/year = $50,000; 500,001 - 1,000,000 subscribers/year = $75,000; and more than 1,000,000 subscribers/year = $100,000.
Next: Why are browser and plug-in makers also responsible for royalties?
5. If a Web site were to present a video produced using H.264 as an advertisement for a product or service sold commercially through that site, is that considered a commercial use of the codec, and if so, who's responsible (and for how much, if you can say)?
MPEG LA: Assuming there is no remuneration for the video itself (in this case, an advertisement), this would fall under "Internet Broadcast AVC Video." The Web site would benefit from being a Licensee to our AVC License, but would not need to pay a royalty for the distribution of such video at least the license term ending December 31, 2015.
6. When an independent producer wishes to legitimately sell (or make commercial use of) a video or movie produced using technologies in MPEG LA's portfolio, how does this producer make arrangements with MPEG LA?
MPEG LA: For more information about MPEG LA's AVC License or to request a copy of the License, the producer should visit this page.
7. Since a plug-in technology such as Adobe Flash (which utilizes H.264) may or may not be used by viewers in the processing of videos that were distributed commercially, and for which royalties were apparently paid, why is Adobe responsible for royalties also? And why would the manufacturer of a (hypothetical) H.264 codec plug-in for Mozilla Firefox be responsible as well?
MPEG LA: As explained earlier, Adobe is considered a seller of its AVC Product, and Adobe would benefit from coverage under our AVC License. The royalties owed, if any, would depend on the number of units Adobe distributed during a calendar year: 100,000 or fewer units/year = no royalty; 100,001 ??" 5,000,000 units/year = US$0.20/unit; 5,000,001+ units/year = $0.10/unit, with a cap of $5 million in 2010. Adobe and Mozilla would be responsible for paying the royalty as described above since they are the providers of the AVC Products.
8. Some are under the understanding that when an open source, non-commercial codec that does not use H.264 is used in the processing or creation of videos that may be playable in consoles or with devices or software that utilize H.264, the creator of that codec is not responsible for royalties to MPEG LA. In other words, if a developer avoids the use of H.264 technology to create a video that a true H.264 codec recognizes as compatible, no charges apply. Is that accurate, and why or why not?
MPEG LA: By definition, an H.264 video is playable using an H.264 codec. To the extent that is true, coverage is provided and applicable royalties are payable under the AVC License.
9. Is there any reason for individuals to suspect that, if today they happen to use technology that attempts to be compatible with H.264, and that is later found to infringe upon MPEG LA patents, the individual users themselves (the viewers and producers of videos using infringing codecs) would become liable for unpaid royalties?
MPEG LA: As answered in #2 above, the consumer, or end user, is not responsible for concluding our AVC License or paying a royalty. However, as also explained in #1 above, when the encoders/decoders are used to provide AVC video content to an end user, the provider of such video service will benefit from coverage under the AVC License.
10. Under current US law, an Internet service provider is granted "safe harbor" against liability for copyright infringement, if the system with which videos or other content is hosted there, or flows through their channels, is automatic and without the ISP's intervention. That law is said to apply to YouTube (and thus Google) when videos from a major content producer (such as Viacom) are uploaded there (although Viacom is, of course, challenging this). But it's my understanding that Google is a payer of royalties to MPEG LA and others, for the use of H.264 in the display of YouTube videos, which may include content where it's protected against copyright infringement. Why do royalties apply to the providers of videos which may include not only non-commercial works but non-authorized or illicit ones as well?
MPEG LA: Google is responsible for the use of patents in connection with any distribution of AVC video content that occurs on its Web site because its Web site is where the transaction took place with the end user, regardless of who supplied the video or whether the video infringed anyone's copyright.
Copyright Betanews, Inc. 2010
