[MPEGIF News] MPEG LA Announces Final AVC.H.264 License Terms

Wed May 19 09:05:38 EDT 2004

http://www.mpegla.com/news/n_04-05-18_avc.pdf
MPEG LA Announces Final AVC.H.264 License Terms 
Final License Agreement to Issue in June 
Denver, CO (May 18, 2024) - MPEG LA, LLC today announced that AVC essential
patent holders have agreed on final terms of license to be included in the
AVC Patent Portfolio License (“License”) scheduled to issue in June. While
many of the terms will be the same as those announced in a November 17 press
release (http://www.mpegla.com/news/n_03-11-17_avc.html), there are some
changes. A summary of the final terms is attached.
In order to assure the worldwide applicability of the License, a principal
change involves the sublicense for “Free Television AVC Video”
(http://www.mpegla.com/news/n_04-03-24_avc.html). Formerly limited only to
over-the-air broadcasting, “Free Television AVC Video” now refers to AVC
Video that constitutes television broadcasting which is sent by an
over-the-air, satellite and/or cable Transmission, is not paid for by an End
User and does not constitute Title-by-Title AVC Video, Subscription AVC
Video or Internet Broadcast AVC Video (covered by other sections of the
License). The party (e.g., a broadcaster) which is identified as providing
Free Television AVC Video service is the Licensee and assumes responsibility
for the applicable royalties.
The License now provides two royalty options for Licensees of Free
Television AVC Video. Added since the November 17 press release is a
one-time fee option of $2,500 per AVC transmission encoder (applies to each
AVC encoder which is used by or on behalf of a Licensee in transmitting AVC
video to the End User). These one-time fees will be offered as an
alternative to annual fees (which have been modified since the November 17
press release) starting at $2,500 per Calendar Year for each Broadcast
Market which includes at least 100,000 but no more than 499,999 Households,
$5,000 per Calendar Year for each Broadcast Market which includes at least
500,000 but no more than 999,999 Households, and $10,000 per Calendar Year
for each Broadcast Market which includes 1,000,000 or more Households.
“Broadcast Market” refers to the geographic area within which an End User
could use an AVC Decoder to view Free Television AVC Video sent by a single
transmitter or transmitter simultaneously with repeaters by a single Legal
Entity.
It is recognized that broadcasters in developing countries may have
different circumstances to be considered. It is also recognized that there
may be AVC Video services that qualify as Free Television AVC Video rather
than Subscription AVC Video or Title-by-Title AVC Video where a nominal (but
no other) payment is required or where other relevant circumstances taking
into account the nature of the video service may apply.
The first term of the License runs through 2010, but it will be renewable
for additional 5-year terms for the life of any Portfolio patent; and
royalties will not increase by more than 10% at each renewal.
Owners of essential patents that expect to participate in the AVC Patent
Portfolio License include Columbia Innovation Enterprises; Electronics and
Telecommunications Research Institute; France Télécom, S.A.; Fujitsu
Limited; General Instrument Corporation, d/b/a Motorola’s Broadband
Communications Sector; Matsushita Electric Industrial Co., Ltd.; Microsoft
Corporation; Mitsubishi Electric Corporation; Koninklijke Philips
Electronics, N.V.; Robert Bosch GmbH; Samsung Electronics Co., Ltd.; Sharp
Kabushiki Kaisha; Sony Corporation; Toshiba Corporation; and Victor Company
of Japan, Limited. In addition, the following companies with essential
patent applications that participated in the deliberations concerning these
license terms also expect to participate in the License if they are
determined to have an essential patent: LG Electronics, Inc., LSI Logic
Corporation and Polycom, Inc.
MPEG LA continues to welcome the submission of issued patents for an
evaluation of their essentiality to the AVC Standard in order to include as
much essential intellectual property as possible under one license for the
benefit of the marketplace. See “Programs in Development” at
http://www.mpegla.com. For each patent submitted, an evaluation fee of US
$8,500.00 to cover the outside cost of the patent expert’s evaluation is
paid to MPEG LA. Additional fees may be required to cover additional outside
costs in the event of reevaluation by patent experts. Submitting parties
must confirm their agreement with the terms and procedures governing the
patent submission process which may be obtained from Jane Tannenbaum,
Director, Contract Administration (jtannenbaum mpegla.com).
Licensing Terms
The licensing terms outlined below are for informational purposes only. They
are not an offer to license and may not be relied upon for any purpose. The
AVC Patent Portfolio License scheduled to be available at the beginning of
this summer will provide the actual terms of license on which users may
rely.
1. Decoder-Encoder Manufacturer Sublicenses
• AVC products sold by a legal entity to end users and as branded OEM for PC
but not sold as part of a PC Operating System (decoder, encoder or product
consisting of one decoder and one encoder = “unit”) 
– 0 - 100,000 units/year = no royalty (available to one legal entity in an
affiliated group)
– US $0.20 per unit after first 100,000 units each year 
– Above 5 million units/year, royalty = US $0.10 per unit
– Maximum annual royalty (“cap”) for Enterprise (commonly controlled legal
entities): $3.5M per year 2005-2006, $4.25M per year 2007-08, $5M per year
2009-10
• Legal entity selling branded AVC products OEM for PC OS may pay for its
customers as follows:
– 0 - 100,000 units/year = no royalty (available to one legal entity in an
affiliated group)
– US $0.20 per unit after first 100,000 units/year
– Above 5 million units/year, royalty = US $0.10 per unit 
– Enterprise cap: $3.5M per year 2005-2006, $4.25M per year 2007-08, $5M per
year 2009-10
• Includes right to make, sell and personal use by or between end users such
as in connection with a video teleconference or mobile messaging (but not
uses covered by #2 below)
• Royalties begin January 1, 2024
2. Participation Fees
• Where End User pays directly for AVC Video
– Title-by-Title (e.g., where viewer determines titles to be viewed or
number of viewable titles are otherwise limited) – 12 minutes of AVC Video
or less = no royalty; >12 minutes in length, royalty payable is the lower of
(a) 2% of price paid to licensee on first arms length sale of the video or
(b) $0.02 per title. Categories of licensees include legal entities that are
(i) replicators of physical media, and (ii) service/content providers (e.g.,
cable, satellite, video DSL, internet and mobile) of VOD, PPV and electronic
downloads to end users.
– Subscription (not limited by title) per legal entity (e.g., service or
content provider) that sells AVC video to the end user for remuneration –
100,000 or fewer subscribers per year = no royalty (available to one legal
entity in an affiliated group); > 100,000 to 250,000 subscribers per year =
$25,000; >250,000 to 500,000 subscribers per year = $50,000; >500,000 to 1M
subscribers per year = $75,000; >1M subscribers per year = $100,000. 
• Where remuneration is from other sources
– Free Television AVC Video – (a) one-time $2,500 per transmission encoder
or (b) annual fee per broadcast market starting at $2,500 per Calendar Year
per Broadcast Markets of at least 100,000 but no more than 499,999
Households, $5,000 per Calendar Year per Broadcast Market which includes at
least 500,000 but no more than 999,999 Households, and $10,000 per Calendar
Year per Broadcast Market which includes 1,000,000 or more Households.
– Free Internet Broadcast (not title-by-title, not subscription) – no
royalty during first term (through 2010), and royalty thereafter shall not
exceed the Free Television AVC Video fees for the period after 2010.
• Enterprise cap: $3.5M per year 2006-07, $4.25M per year 2008-09, $5M per
year 2010
• Royalties begin January 1, 2024
3. General Terms
• First term through 2010
• Renewable for additional 5-year terms for life of patents
– Rate protected – royalties will not increase by more than 10% at each
renewal
MPEG LA, LLC
Editorial Contact:
Larry Horn
301 986 6660
lhorn mpegla.com