MPEG LA, a group that represents patent holders of emerging digital media standards, on Monday set royalty rates for the H.264--also called MPEG-4 Part 10 AVC (Advanced Video Coding)--compression technology, or codec.
Codecs help reduce the size of bulky digital files by removing data that won't be missed in the translation and are considered key to developing new video services over the Internet and wireless networks. The AVC standard is expected toover MPEG-2, the standard currently used by most digital cable providers and DVD manufacturers.
Patent holders include Columbia University, Electronics and Telecommunications Research Institute of Korea, France Telecom, Fujistsu, LG Electronics, Microsoft, Sony, Nokia and Philips Electronics.
"For essential intellectual property holders of such wide diversity to agree on the terms of a joint license in just a matter of months is a remarkable achievement," MPEG LA Chief Executive Baryn Futa said in a statement.
Furthermore, he said, it gives "testimony to their support for the AVC standard and their desire to make this promising new technology widely available to the market in the fastest time possible."
According to MPEG LA's royalty rates, product manufacturers must pay 20 cents per encoder, decoder or both after the first 100,000 units, which are free up until that point. Above and beyond 5 million units, manufacturers pay only 10 cents per unit. The royalty rates are capped at $3.5 million per year in 2005 and 2006; $4.25 million per year in 2007 and 2008; and $5 million per year in 2009 and 2010.
Licensing terms are set through Dec. 31, 2010, but to encourage market adoption, the license has a grace period in which the decoders or encoders sold before Jan. 1, 2005, include no royalty fees.
Besides codec royalties, licensees must pay 0.02 cents per title play of AVC-encoded video, if it is greater than 12 minutes in length. Licensees can include cable, satellite, mobile or Internet companies. For subscription programs, licensees must pay annual fees based on their number of video subscribers. For example, they must pay $25,000 a year for a subscriber base of more than 100,000, or $100,000 per year for more than 1 million video subscribers.
Internet broadcasters can use the codec on a royalty-free basis until 2010, because the market is still developing, according to MPEG LA.