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12.02.2003
Originally featured on BroadcastEngineering.com
Technology licensing fee structure established for AVC standard

Owners of patents on H.264/MPEG-4 AVC compression have agreed on the terms of a joint patent license for implementation and use of ITU-T H.264 and MPEG-4 Part 10 AVC, according to a statement from MPEG LA, a digital technology licensing agency.

The agreement is important for broadcasters because the AVC standard is likely to be used in future HDTV operations.

Among the highlights of the licensing terms are:

Decoder-Encoder royalties

  • Royalties to be paid by end product manufacturers for an encoder, a decoder or both begin at $0.20 per unit after the first 100,000 units each year. There are no royalties on the first 100,000 units each year. Above 5 million units per year, the royalty is $0.10 per unit.

  • The maximum royalty for these rights payable by an enterprise is $3.5 million per year in 2005-2006, $4.25 million per year in 2007-2008 and $5 million per year in 2009-2010.

  • The initial term of the license is through Dec. 31, 2010. The license will provide a grace period in which no royalties will be payable on decoders and encoders sold before Jan. 1, 2005.

Participation fees

  • Title-by-Title: For AVC video, no royalties are paid up to 12 minutes in length. For AVC video greater than 12 minutes in length, royalties are the lower of 2 percent of the price paid to the licensee from the licensee’s first arms-length sale or $0.02 per title.

  • Subscription: For AVC video provided on a subscription basis, no royalties are payable by a system (satellite, Internet, local mobile or local cable franchise) consisting of 100,000 or fewer subscribers in a year. For systems with more than 100,000 AVC video subscribers, the annual participation fee is $25,000 up to 250,000 subscribers, $50,000 for more than 250,000 AVC video subscribers up to 500,000 subscribers, $75,000 for more than 500,000 AVC video subscribers up to 1,000,000 subscribers, and $100,000 for more than 1,000,000 AVC video subscribers.

  • Over-the-air free broadcast: There are no royalties for over-the-air free broadcast AVC video to markets of 100,000 or fewer households. For over-the-air free broadcast AVC video to markets of greater than 100,000 households, royalties are $10,000 per year per local market service (by a transmitter or transmitter simultaneously with repeaters, e.g., multiple transmitters serving one station).

  • Internet broadcast: Since this market is still developing, no royalties will be payable for Internet broadcast services (non-subscription, not title-by-title) during the initial term of the license and then shall not exceed the over-the-air free broadcast TV encoding fee during the renewal term.

  • The maximum royalty for participation rights payable by an enterprise is $3.5 million per year in 2006-2007, $4.25 million in 2008-2009 and $5 million in 2010.

For more information, please visit: www.mpegla.com.

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