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HEVC Licensing Terms Not Done Yet

NEW YORK— While it had been hoped that a patent pool license for the High Efficiency Video Coding compression scheme would be available from licensing body MPEG LA by now, vendors that required this patented technology to build their products are still waiting.

The new HEVC Patent Portfolio License will clear the way for manufacturers to develop hardware-based compression boards based on it, software algorithms that take advantage of it, and newly emerging decoding technology to enable all video files to be displayed on Ultra HD TVs, computers, tablets, and smart cellphones.

Larry Horn, MPEG LA President and CEO, said the HEVC license will use a pool licensing approach with simple easy-to-understand terms to make the technology readily accessible to the largest possible market in the shortest possible time. It’s also welcome news for encoder manufacturers like Ateme, Cinegy, Elemental Technologies, Ericsson Harmonic and Wowza to name a few, which have clamored for a resolution on the licensing terms so they can begin shipping units to customers. Indeed, many vendors have already sent prototype units to key customers, and monitoring usage, however small at this point, in order to test the technology and see if the promised bandwidth savings, without affecting image quality, are real.

“We hope to issue an HEVC license during the summer,” said Tom O’Reilly, manager of Research and Public Relations at MPEG LA, LLC. “As I am sure you can understand, it takes time to bring together so many parties each with their own independent decision-making and approval process under the same agreements.”

Indeed, the holdup is reportedly surrounding the pooling of as many patent holders as possible under a single license so that users have the option to pay the fee to one organization, rather than to negotiate individual licenses with each patent holder.

“As contemplated, the HEVC license will utilize a modern streamlined pool licensing approach with simple easy-to-understand terms, making the technology readily accessible to the largest possible market in the shortest possible time,” said Larry Horn, MPEG LA president and CEO, in a statement in a release announcing preliminary terms. “MPEG LA salutes the cooperation of patent owners who have worked hard to reach common ground in making a joint patent license available for the convenience of HEVC adopters.”

In January, MPEG LA released a preliminary fee structure, with parameters similar to its H.264 license. Both H.264 and HEVC allow the first 100,000 units to be used for free, and both charge $0.20 per unit (stream) after that. However, with H.264, the royalty drops to $0.10 after 5 million units and is capped at $6.5 million. While the HEVC Patent Portfolio License document has not been made public at this point, O’Reilly said the HEVC royalty, which would be capped at $25 million annually per licensee, may increase by limited amounts at each renewal term.

The significant difference between H.264 (MPEG-4) and H.265 (HEVC) licensing terms reflects the potential multiple—some still unknown—uses that new IP-based video services will require in the future.

“There are always some business risks in trying to determine what the licensing structure will be and then developing a product that fits our business models,” said Keith Wymbs, vice president of marketing at software-based encoding technology supplier Elemental Technologies. “We believe earlier disclosures on the HEVC Patent Portfolio License is a best case scenario for the entire industry.”

MPEG LA has said HEVC and MPEG-H Part 2 standard, has been designed to improve video coding and, thus, video streaming for Internet and mobile service providers. It is also said by others in the industry that HEVC reduces the data rate needed for video coding by 50 percent when compared to the current state-of-the-art, H.264 while delivering better image quality. That extra bandwidth gained through HEVC compression is sorely needed, as files get bigger and ever greater in number.

Under the original proposal, royalty fees for HEVC products were supposed to be paid retroactively from May 1, 2013, but this has been suspended pending the final licensing terms.

“As MPEG LA is not yet offering an HEVC license, no royalties are due to MPEG LA at this time,” O’Reilly said. “However, when MPEG LA does issue an HEVC license, royalties will be payable for HEVC products from May 1, 2013 forward.”

Another issue that will be part of the final licensing agreement: There are no content-related royalties assessable to those who sell content on a subscription, pay per stream or pay per download basis. This will save companies like Adobe Systems, Apple, Cisco, Microsoft and others significant sums of money.

“Per the HEVC license terms that have been announced, there will be no separate royalties for HEVC content,” O’Reilly said, “but that only pertains to royalties payable to MPEG LA for the benefit of HEVC patent holders with regard to their patents under the License.Any remuneration between content owners and resellers of that content is a matter entirely separate from royalties payable for the patent license to be negotiated and determined by those parties.”

In addition, content distributors are not mandated to use HEVC and in fact some (Google) have stated they will instead use VP9, an open and royalty-free compression standard being developed by Google.

As of January, the list of essential patent holders that have agreed on preliminary HEVC license terms includes: Apple Inc., British Broadcasting Corporation, Cisco Technology, Electronics and Telecommunications Research Institute of Korea, Fraunhofer-Gesellschaft zur Foerderung der angewandten Forschung e.V., Hitachi Maxell, Ltd., Humax Co., Ltd., JVC Kenwood Corp., KT Corp., LG Electronics Inc., M&K Holdings Inc., NEC Corp., Nippon Hoso Kyokai, Nippon Telegraph and Telephone Corp., NTT Docomo, Inc., Orange SA, Siemens AG, SK Telecom, Telefonaktiebolaget LM Ericsson, Thomson Licensing, and Vidyo, Inc. Apparently, four companies that have signed on have asked not to be identified.