MPEG-4 Licensing Agreements Announced After Apple Releases QT 6 (Including Analysis)

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Several hours after we noted the release of QuickTime 6 yesterday, the MPEG LA licensing group published the final terms of the MPEG-4 Visual and Systems Patent Portfolio License. This is no doubt the decision that prompted yesterdayis release of QuickTime 6 to the general public. From the MPEG LA press release:

MPEG LA and patent holders to the MPEG-4 Visual Patent Portfolio License, MPEG-4 Systems (without MPEG-J) Patent Portfolio License and MPEG-J Patent Portfolio License reached agreement on final licensing terms following their meetings in San Francisco on June 25 - 26, 2002. In the interest of one-stop convenience, users will be offered the opportunity to sign up for a license under patents that are essential for any or all of these standards. The official licenses are scheduled to issue in September.

The licenses established will govern the creation and deployment of MPEG-4 content both on the Internet and on other electronic mediums and devices. This includes television and stored video, as well as the Internet and mobile devices.

The new terms require manufacturers (software publishers, hardware makers of MPEG-4 devices, and the like) to pay 25 cents (US) for each encoder and decoder they sell, with a cap of US$1,000,000. This means that for each Mac that is sold, or each copy of QuickTime that is downloaded, Apple has to pay 25 cents, but the company is capped at US$1,000,000 per year making each copy of QuickTime much cheaper.

Now for the bad news: MPEG LA is also requiring an additional royalty on broadcast content. This royalty is charged to the content provider, as opposed to the end user, and there is no fee on the first 50,000 viewers. In addition, there is a similar cap of US$1,000,000 per year. The legalese details from the MPEG LA press release:

(b) for the use of decoders and encoders to decode or encode MPEG-4 video (to be paid by the party that is the apparent source of such video to the consumer), a licensee may choose to pay US $0.25 per subscriber per year or US $0.000333 per minute of MPEG-4 video used, each subject to an annual cap of $1,000,000 per legal entity, or a $1,000,000 annual paid-up fee (with no royalty reporting obligation), but no royalty is payable on the first 50,000 subscribers during a calendar year (applies to no more than one legal entity in an affiliated group).

There is a lot more information in the full press release, and for those interested in the complex licensing options and structures, itis a good read. A C|Net report detailing the licensing agreement adds several useful bits of information:

"Weive met a lot of the concerns that have been expressed in the marketplace," said Lawrence Horn, spokesman for the group, which represents 18 patent holders that have claims on underlying MPEG-4 technology. "Weive built a licensing model thatis usable in the industry."

[...snip...]

Rob Koenen, president of the MPEG Requirements Group, said that if MPEG LA had not reconsidered per-use fees, the technology might well have withered.

"If the terms are acceptable for the markets, MPEG-4 will take off big time. If not, it will be a serious impediment," Koenen said.

More information on the MPEG-4 licensing decision can be found in MPEG LAis press release and in the CNET report. Information on Appleis newly-released QuickTime 6 is also available at the QuickTime Web site.

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