10 questions for MPEG LA on H.264

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?