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The MPEG-LA doesn't charge royalties to it's members. The members also all hold patents - it's just an agreement not to sue each other.

They do charge royalties to anyone not in the association - those royalties can of course be >100%.

In the old days we used to call this a cartel - but that's illegal.



I'm not an MPEG-LA booster by any means (was involved with VP8) but for the sake of clarity, they can't and don't charge arbitrary royalties. The agreement for being involved in H.264 was to provide a license under "RAND" terms, meaning Reasonable And Non-Discriminatory.

What that means in practice is that you cannot charge Apple $1 per copy and Google $10 just because you hate Google. You have to have terms that apply to everyone equally, and they have to be 'reasonable', which presumably 100% of your gross revenue would not be.

That said, I do believe the patent holders have the right to circumvent the pool and cross-license directly from each other. I'm not too clear on how that relates to the RAND policy, but my cynical guess would be that it can be used as cover for some pretty sweet deals.


While RAND terms are generally better than having Microsoft or Apple able to pull the rug out from under you at any time, they are very specific in what they mean by "reasonable" and "non-discriminatory".

The most obvious example of this is that it's not "reasonable" to charge usage royalties on FLOSS software. There is a school of thought that flat-rate royalties don't clash as badly since you don't need to track usage, but since we're talking about standards produced for the public good, obviously royalty-free would be better. Either way, by assuming and enforcing a business model from the hardware days, it is "discriminating" against certain busineses.

Similarly, they've dropped charges on free web video, which is a clear attempt to break into a market they've had trouble in before. So as a class of users at least they can charge you more if they think they can get away with it.

Finally, it appears that the (highly successful) video game industry thinks that royalties designed for the TV industry aren't particularly reasonable for them and so avoids MPEG audio and video formats whenever possible.

So while they perhaps made sense 20, or even 10, years ago, RAND terms are no longer RAND.


The MPEG-LA doesn't charge royalties to it's members

Is that true? I though members had to pay royalties even if they had a patent in the pool.


It's a complex and secret process - but MSFT and Apple are not paying $10 for each copy of windows/iOS that includes an H264 player!


There's a royalty cap. I believe MSFT is paying the maximum royalty cap for H264. And Apple only has one patent in the patent pool of 1000+ patents.


$10? If I understand the license[1] right - it's more like $0.10 to $0.20.

[1] - http://www.mpegla.com/main/programs/avc/Documents/AVC_TermsS...


This isn't the case. See the HP and MPEG-LA testimony before the FTC.

The pool agreement isn't exclusive. The members are free to license their patents through other venues, including cross licensing.

In fact, one of the points MPEG-LA made in their initial review letter with the DOJ is that he pool would not be used to force anyone to pay for a license to a patent which they were already licensed for some other means.

So a pool member only has to pay royalties iff they've been unable to achieve complete cross-licensing with the other pool members.


MPEG-LA does charge royalties to companies that have patents in the pool.




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