While the MPEG LA brief press release this week about bringing Alcatel Lucent into line over MPEG patents is illuminating, we don’t think cable, satellite and IPTV operators, or DVD makers or Hollywood studios were ever worried enough to consider taking Lucent’s claims seriously.
Patents pools are very straightforward creations and thoroughly necessary to make anything happen in technology. At present we are fighting to have one for the all too important LTE cellular generation of technology, having had a very messy previous three rounds of cellular royalties ‘ still a bone of huge contention, such as that going on with legal strike between Nokia, Apple and HTC right now.
Video compression patents are about the same age as cellular technology but only on their second generation really. They have taken about 20 years to bring to any kind of order and if we had never had an MPEG organization and later an MPEG LA licensing authority the huge variety of potential ways of making a video codec would still be hobbling our industry. Digital TV would not be possible, YouTube would not be possible, or if it was, no PC program would be able to play its videos without someone paying a license.
By the simple expedient of agreeing which patents are at the heart of the process of encoding video and the 26 key companies who own the multiple hundreds of patents (895 – many of them are just the same patents filed in different countries ‘ there are 36 pages just listing them on the MPEG web site) then sitting down and agreeing what share of the royalties is fair for each of them, a single set of licensing terms can be arranged which frees the entire industry from messing about with licensing 100s of patents and getting into extensive litigation.
But there is always one company that wants to hijack the entire process and claim that it ‘invented’ the most important part of the process. Lucent has been that company now on two occasions, trying to highjack the MP3 patents and again the MPEG2 patents, though much of that work is intermingled because MPEG2 uses the same audio patents.
In 2007 Lucent won a $1.5 billion court room battle with Microsoft over MP3 patents, only to have an appeals court crush the payment and its patents themselves come under increasing scrutiny.
The role of MPEG LA is to agree which patents are essential, those which you cannot avoid using, if you are to build an MPEG2 encoder or decoder. It then has to agree with patent holders to join its pool, and if they don’t it can go back to the standards making committees and change the standard, to use technology that CAN be licensed through a pool. And it went through this process with Alcatel before it bought Lucent, but which then decided that it would tuck the patents away in a fake company, the Multimedia Patent Trust, which it beneficially owned and pretend that these patents were outside its control.
It did this in order to renege on its agreement with MPEG LA, and sneak up on users of MPEG2 and tell them they had to license its technology or they would be sued, even though they had already paid for an MPEG LA license.
Back at the beginning of this legal action Lucent began asking Hollywood studios for royalty payments for its five patents numbered 4,958,226, 5,136,377, 5,227,878, 5,500,678 and 5,563,593. These were wide ranging basic patents which talk about organizing GOPs (groups of pictures, standard chunks of delta frames between I Frames), and about core compression, and various other basic attributes of MPEG style codecs. To hear that these are NOT essential to us sounds remarkably like they are no patents at all, and although no-one is openly saying that, others among the hundreds of patents that lay claim to being essential, cover similar or identical ground. In the end running a patent pool is like permanently sitting on the fence ‘ if you suggest that one patent is NOT essential and the owner will sabotage your licensing efforts by claiming after the fact, that it is. Legal actions are very good at putting licensees off, even if they are baseless.
Most licensees simply treat this as a signal that the technology is not yet ‘ripe’ for prime time, and sit on the sidelines and wait.
Now the MPEG2 patent list features Alcatel among the first of the 26 companies which contributed technology to the MPEG2 patent pool, on its web site, but none of the disputed Lucent patents are there.
However the MPEG LA legal win confirms that if these patents ARE essential, then they are part and parcel of the patent pooling arrangement and if they are not then MPEG2 licensees do not have to use them or pay royalties for them simply by dint of using MPEG2. Our guess is that they are safer with these patents inside the patent pool, and MPEG LA royalty members will welcome Lucent’s patents with open arms, allocate a small amount of royalty to them, and forget about the entire affair.
MPEG LA said, ‘As part of the settlement the Multimedia Patent Trust will submit the patents that were diverted to it in conjunction with the 2006 merger between Lucent and Alcatel for a determination of essentiality in accordance with MPEG LA’s normal procedures. If it is determined that one or more of the patents are MPEG-2 Essential Patents or MPEG-2 Systems Essential Patents, the Multimedia Patent Trust will join the MPEG-2 Patent Portfolio License and/or the MPEG-2 Systems Patent Portfolio License as a Licensor and all such patents will be included.’
This is more or less what was on offer by the MPEG LA throughout the case and news reports that Lucent has lost $2 billion in potential patents is well wide of the mark. That was never going to happen. While we can no longer look up MPEG2 patent costs on the MPEG LA web site, they were just a few dollars per device up to a maximum and we think that maximum was around $2 million a year. Sure there might be a over 1,500 licensees of MPEG2 around the planet (every TV and set top maker for a start) but they won’t all pay the maximum and many will just pay $2 per device or a few cents per DVD pressed.
Alcatel might have sued for that amount but do we really think that 895 patents from other companies just as large and litigious as Alcatel are only worth collectively the same as 5 patents that Alcatel deliberately hid. Like we said, it was never going to happen.
Funnily enough this same hijacking process has already been seen in H.264, the MPEG4 AVC 10 patent pool, with Qualcomm trying to sue Broadcom with some patents that it deliberately withheld from the standards body and kept outside the patent pool. As much as we have the utmost respect for Qualcomm, this was perhaps its darkest day in court and the entire legal crew that tried to win this particular battle are no longer with their respective companies, after the judge reprimanded each of them.
Whatever is next, such as a 3D format for content, let’s hope that the patent pools can learn from these mistakes and get it right without legal redress. But we doubt it. Someone will claim they invented 3D and we wouldn’t be too surprised if it turned out once again to be Lucent.