MPEG-4 license issues resolved

The dispute around licensing for the MPEG-4 digital compression standard seems to be over with new licensing terms published by MPEG LA LLC Monday.

"A lot of feedback has been channeled the way of MPEG LA and they have listened to the industry, but fine details still need to be worked out," said Rob Koenen, president of the MPEG-4 Industry Forum (M4IF), which represents companies adopting the MPEG-4 standard.

"I think this is what the industry needed and I hope the dispute is over, but I am waiting to see industry reaction," Koenen said. "MPEG-4 is kind of a complex standard to license because it works across many different applications, platforms and services. I see the license as a product and this is version 1."

Koenen is most happy about the minimum threshold and cap on the usage fee that are part of the licensing scheme. "The threshold is important for small time users and the cap for large users."

MPEG LA, a group of patent holders governing MPEG-4, stirred a debate after releasing a proposal for licensing terms in February. Apple Computer Inc. delayed the release of its QuickTime 6, which uses MPEG-4 technology, because it didn't agree with the proposal. MPEG-4 is a digital compression standard for multimedia developed by the Moving Pictures Experts Group (MPEG). Many companies hold patents on parts of the standard. They are represented on licensing matters by MPEG LA.

Under the new terms, a provider of MPEG-4 video on the Internet or to mobile users that benefits commercially from the technology can choose to pay US$0.25 per subscriber per year or $0.02 per hour of MPEG-4 video used, each subject to an annual cap of $1 million. No royalty is payable for the first 50,000 subscribers to a service per year, according to an MPEG LA statement.

Software companies, which make the MPEG-4 decoders and encoders, pay $0.25 per encoder and $0.25 per decoder sold, with a cap of $1 million on each and no royalties on the first 50,000 encoders and decoders sold per year, MPEG LA said.

Other licensing options are in place for set-top boxes used by cable and satellite television companies, as well as for packaged media, such as CDs and video-on-demand offerings.

Large users have the option to pay the maximum fee and not have any royalty reporting obligations. Also, a parent company can pay a single license to include all subsidiaries that are at least 50 percent owned by the parent, MPEG LA said.

Licenses will be available from September and parties that sign a license agreement in the first six months will not have to pay royalties on products sold through Dec. 31, 2003, MPEG LA said in its statement.

"This provides transparency," said Sebastian Moeritz, chief executive of Dicas Digital Image Coding, a maker of video coding technology based in Berlin, and a member of the M4IF. Dicas' latest product is mpegable x4 which enables users to create videos in MPEG-4 format.

"Content providers and service providers can now anticipate how much they have to pay over a year. If you pay per time unit, there may well be subscribers who are online 24 hours per day," Moeritz said. "As a video coding software vendor, we know that until Dec. 2003, we will not have to pay royalties."

"The importance is that everyone sings from the same hymn sheet and everybody knows where they stand. There may always be market participants that do not always see their usage model, but the fact that MPEG LA has this model now will send positive tones to the industry," said Moeritz, who also sits on the board of M4IF.

MPEG-4, the successor to MPEG-2, will first be used on the Internet. It promises a much better picture at lower bit rates than are common today. MPEG-4 is also expected to be used in many devices, including TV set-top boxes and mobile phones. Apple and RealNetworks Inc. are among the biggest promoters of MPEG-4 use on the Web.

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