MPEG LA Continues No-Royalty Licensing Of Free H.264 Video

I just got off the phone with MPEG LA President and CEO Larry Horn regarding MPEG LA’s announcement that the AVC Patent Portfolio License will continue not to charge royalties for free internet video through December 31, 2016. Here are the details of the Q&A.

Ozer: You made a lot of folks happy today, Larry, congratulations.

Horn: Thanks. We’ve been getting a surprising number of emails and calls about what our plans were, and we’re glad that this issue is settled for the next five years or so.

Ozer: What was the thinking behind the decision? While I understand letting the small fish get away, certainly there are lots of large sites out there doing quite well delivering video with advertising support.

Horn: The patent holders wanted to align the royalty obligation with the actual receipt of revenue, as we do with title by title or subscription licenses. Though some companies are doing well with advertising supported video, overall the models are still in flux, and the patent group didn’t want to plug a royalty into a business model that’s still unsettled.

Ozer: Is there any difference whether I distribute the video directly from my own website, or whether I distribute via iTunes or other aggregation service?

Horn: A royalty is payable either way. The difference is in who is responsible for paying it, and the apparent provider of the video to the end user is responsible. To be clear, a royalty applies only where there is remuneration for the title distributed.

Ozer: I understand that even though there’s no royalty, there’s still an obligation to sign a license with MPEG-LA to use H.264.

Horn: The license still would be beneficial because it provides coverage for use of H.264 in these free internet applications. Therefore, all websites using H.264 for free internet distribution should contact our licensing department and sign a license, even though there’s no royalty.

Ozer: What happens if they don’t?

Horn: If they don’t, they can negotiate licenses directly with patent holders. Otherwise, they could still be held responsible for infringement.

Ozer: Let’s review some instances where a royalty does apply and identify who has the obligation to pay the royalty. As I understand it, if I charge for a movie or other content that’s longer than 12 minutes, I have to pay the lower of 2% of the price or $.02. Say I sell through iTunes or Cinema Now—who pays the royalty?

Horn: The license is owed by the "apparent provider" of the video, which in this case would be iTunes or Cinema Now. Just to be complete, there’s also a royalty on publishers and others charging by subscription for their video, though the royalty obligation starts only after you exceed 100,000 subscribers. Still, in all these cases, even though you don’t owe any royalties, you still need a license to use the H.264 technology, and should contact our licensing department.

Ozer: What if I sell the video from my own website, and use a site like Yahoo or Google as my shopping cart or collection point?

Horn: In that case, you would owe the royalty.

Ozer: What about with DVD or Blu-ray discs?

Horn: DVD obviously involves the MPEG-2 patent pool, while Blu-ray can be H.264, MPEG-2, and/or VC-1. If you’re replicating the discs, the replicator collects the royalties from you and pays MPEG LA. If you’re producing via recordable discs, you owe the royalty.

Ozer: Again, Larry, great news. I think the patent group and your organization made a great decision.

Horn: Thanks. We think that in the long run, it’s the right decision for our patent group and all the publishers and consumers using the technology.

This article also appears on Jan Ozer's Streaming Learning Center blog.