MPEG-2 PATENT PORTFOLIO LICENSE SUMMARY
Set forth below is a description of certain terms of the MPEG-2 Patent Portfolio License. The terms, usage and language of the License (and not the description set forth below) control the terms and conditions under which the patents in the MPEG-2 Portfolio are licensed. The information set out below is intended solely to assist in your understanding of the license, but shall not and cannot be used to vary the terms of the License. The actual License agreement provides the only definitive and reliable statement of license terms. Please contact MPEG LA if you have any questions.
Click here to download a summary of the MPEG-2 Patent Portfolio License.
Each patent in the MPEG-2 Patent Portfolio is essential for implementing the main profile of the MPEG-2 Video (excluding scalable extensions) and Systems standard specifications: ISO/IEC IS 13818-1 Information Technology - Generic Coding of Moving Pictures and Associated Audio Information including annexes C, D, F, J, and K; ISO/IEC IS 13818-2 including annexes A, B, C, D but excluding scalable extensions; and IS 13818-4 but only as it is needed to clarify IS 13818-2 ("MPEG-2 Standard"). (Note: As of January 1, 2006, parties using the MPEG-2 Systems Standard in products without MPEG-2 video encoders or decoders will benefit from and will be covered under the MPEG-2 Systems Patent Portfolio License, in addition to other licenses that may be required (e.g., for non-MPEG-2 video codecs).)
The various sublicenses granted by the License (Sections 2.1 - 2.3) are worldwide, nonexclusive and nontransferable, but a Licensee can extend coverage to its Affiliates (Sections 1.1 and 2.6). Licensors are obligated to include all MPEG-2 Essential Patents wherever they issue and cannot withdraw coverage of patents to Licensees that already have signed up during a period when a particular Licensor and/or patent(s) was in the Portfolio. New Licensors and essential patents may be added at no additional cost during the term, and coverage is for the entire term.
Product Categories and Royalties
Click here to download a document summarizing MPEG-2 product categories and royalties.
No license is conveyed unless applicable royalties are paid. Therefore, only products on which royalties are paid are licensed.
Under the MPEG-2 Patent Portfolio License the party that offers MPEG-2 Royalty Products (Section 1.18) for Sale (Section 1.22) to the End User is responsible for royalties on the various categories of end product (in hardware or software) sold or placed into the Licensee’s stream of distribution to the End User. In other words, a product made by a Licensee that carries the Licensee's customer's brand name or is otherwise controlled by the Licensee’s customer is not a licensed product under the Licensee’s License; if the Licensee’s customer has also executed the License, such product would be a Licensed Product under the customer’s License once the applicable royalty has been paid. This is because the product is not Sold in accordance with Section 1.22 of the License to an End User through Licensee's chain of distribution (rather, it is Sold through Licensee's customer's chain of distribution).
Section 3 of the License provides the schedule of royalties that apply to the sublicenses granted under Section 2:
(1) For MPEG-2 Decoding Products in hardware or software (such as those found in set-top boxes, DVD players and computers equipped with MPEG-2 decode units), the royalty is US $2.50 from January 1, 2002 and $4.00/unit before January 1, 2002 (Sections 2.1 and 3.1.1), but $2.00 under the new extended License from the later of January 1, 2010 or execution date.
(2) For MPEG-2 Encoding Products in hardware or software, the royalty is US $2.50 from January 1, 2002 and $4.00 before January 1, 2002 for each encode unit (Sections 2.2 and 3.1.2), but $2.00 under the new extended License from the later of January 1, 2010 or execution date.
This sublicense does not grant a license to use MPEG-2 Encoding Products to encode/produce DVDs or other MPEG-2 Packaged Medium for other than personal use of Licensee’s customer, however; the grant to encode/produce DVDs or other MPEG-2 Packaged Medium for other than personal use of Licensee’s customer is covered by the sublicense for MPEG-2 Packaged Medium, and the royalties for that sublicense are assessed on the MPEG-2 Packaged Medium itself (see (3) below). Encoding Product Licensees are required to give notice (covering the exclusion from the sublicense granted by Section 2.2) that Encoding Products may not be used in any manner for encoding MPEG-2 Packaged Media without a license under applicable patents (Section 7.16.1).
(3) For MPEG-2 Packaged Medium, the royalty is $0.03 from March 1, 2003 for the first MPEG-2 Video Event per copy (US $0.04 before Sept. 1, 2001, $0.035 from Sept. 1, 2001 – Feb. 28, 2003), but $0.0176 during 2010 and $0.016 after 2010 from the later of January 1, 2010 or execution date of the new extended License, plus $0.01 for each additional 30 minutes or portion recorded on the same copy, but not to exceed (a) US $0.03 from March 1, 2003 for a Single Movie (US $0.04 before September 1, 2001, $0.035 from September 1, 2001 – Feb. 28, 2003) or $0.0176 during 2010 and $0.016 after 2010 from the later of January 1, 2010 or execution date of the new extended License, plus (b) US $0.02 for the second Movie recorded on the same copy as the first Movie, and (c) US $0.01 for each copy having a normal playing time up to and including but not more than 12 minutes of video programming encoded into an MPEG-2 compliant format (Sections 2.3 and 3.1.4.-22.214.171.124). "MPEG-2 Video Event" (Section 1.20) is a unit of video information having a normal playing time of any length up to and including 133 minutes, and "Movie" (Section 1.9) is a single motion picture and related materials but not a second motion picture whether or not related.
To make it easier for Licensees to account for their MPEG-2 Packaged Medium royalties, Section 3.1.7 provides that for discs from September 1, 2005 forward, Licensees may elect a simplified option for reporting MPEG-2 Packaged Medium royalties under which they pay the applicable MPEG-2 Video Event rate for each MPEG-2 video disc regardless of its specific content or playing time (except where the playing time is 12 minutes or less in which case the royalty would continue to be $0.01). By choosing this option, Licensees may avoid having to distinguish between Movie and non-Movie content or otherwise accounting for the non-Movie playing time of MPEG-2 Packaged Medium, except where the playing time is 12 minutes or less. Please note, for example, that while the above License provisions allow Licensees to pay the applicable MPEG-2 Packaged Medium rate for two DVD discs consisting of one Movie and related materials, choosing this option will require Licensees to pay US $0.03 for each disc regardless.
(4) A royalty of $2.50 (US) from January 1, 2002 /$6.00 before January 1, 2002 per unit applies to Consumer Products (defined in Section 1.4) such as camcorders, read/write DVD players, computers and/or software, etc having both encoding and decoding capabilities (Section 3.1.3).
Coverage is from June 1, 1994 through the expiration of the MPEG-2 Patent Portfolio Patents and may be voluntarily terminated by the Licensee after December 31, 2015 (Sections 6.1 and 6.4).
Other important provisions
A Licensor may instruct the Licensing Administrator to remove its patents from coverage as to a particular Licensee if that Licensee brings a lawsuit or other proceeding for infringement of an MPEG-2 Related Patent or an MPEG-2 Essential Patent against the Licensor and has refused to grant the Licensor a license on fair and reasonable terms and conditions under such patents on which the lawsuit is based (one example of which is the Licensors' per patent share of royalties payable under the License). The reason for this provision (Section 6.3) is that the License is to protect companies from being sued for using MPEG-2 but should not be used to protect a Licensee so that it can sue others; it encourages negotiation and innovation in support of the standard.
Any Licensee is free to add MPEG-2 essential patents to the Portfolio that it or an affiliate may own on the same terms and conditions as all other Licensors (Section 7.4). If a Licensee chooses not to do so, however, it must agree to license such patents to any Licensor or Licensee on fair and reasonable terms (one example of which is the Licensors' per patent share of royalties payable under the License). The purpose of this provision (Section 7.3) is to assure, for the benefit of all Licensees, that a Licensee does not take advantage of the MPEG-2 Patent Portfolio License, on the one hand; yet refuse to license its own MPEG-2 essential patents on fair and reasonable terms.
A most favorable royalty rates protection is included to assure Licensees that no Licensee will get more favorable royalty rates than another (Section 7.7).
Licensee information is treated as confidential (Section 5).