Agreement Reached on MPEG Intellectual Property Rights Licensing Group

Louisville, Colorado, USA, March 27, 1995 -- An MPEG-related licensing entity will be formed to provide efficient access to intellectual property rights (IPR) necessary for the implementation of MPEG technology worldwide.

This endeavor should result in widespread, nondiscriminatory and reasonable patent rights licensing of the core digital compression technology for conventional-resolution television involved in MPEG. The process has not yet addressed royalty issues for higher-resolution pictures, such as HDTV. MPEG stands for Moving Pictures Experts Group.

The announcement follows a March 23 MPEG IPR group meeting held in conjunction with an MPEG meeting in Lausanne, Switzerland, March 20-24, 1995, attended by representatives of more than 50 companies that manufacture and use digital compression technology.

Baryn S. Futa, executive vice president and chief operating officer (COO) of Cable Television Laboratories, Inc. (CableLabs®) reported the progress made by the Working Group established to deal with the actual issues of creation of a licensing entity.

Futa serves as the chairman of the MPEG IPR Group which, in the course of its work, addressed issues such as: (1) How to identify which patent holders were willing to participate in this effort. (2) Whether they own rights necessary for implementation of MPEG core technology. (3) Establishing the entity's administrative structure as an ongoing effort that works with new licensees and licensers, the licensing structure, and the allocation of royalties.

As such, the Working Group at the Lausanne meeting identified several "first order" issues and announced its initial conclusions on each one. The group arrived at an initial conclusion on a model for paying royalties on MPEG-related products such as digital encoders; digital decoders, including settop boxes; digital videodisk (DVD) players; and prerecorded storage media such as video CDs, DVDs, and prerecorded magnetic media.

The initial conclusion is that there would be a $3 to $4 (U.S.) royalty paid on each digital decoder, including MPEG-2 settop boxes and DVD players, and a fraction of that dollar amount paid as royalty on each video CD or DVD, for example. There are different amounts set for rental product versus purchased product.

The MPEG IPR Group began developing this plan in September 1993. Said Futa: "At our Paris meeting in April of last year, we were tasked with moving forward to a solution. Now at our Lausanne meeting, we can announce that the solution is in hand and a licensing entity will be formed."

"I hope that all companies and individuals worldwide who believe that they have important patent rights for MPEG core technology will join our effort to make MPEG a reality" Futa said.

The IPR Issue

"Digital compression is a keystone of the networks of the future and MPEG is the digital television standard for the next century," said Futa. He noted that the convergence which MPEG fosters provides a clear path to worldwide interoperability, and serves to open the marketplace to multiple vendors.

"However, this great achievement has resulted in MPEG core technology that includes many different patents from many different companies and individuals worldwide. Unless a creative way is found to provide easy, reasonable, fair and nondiscriminatory access to such patents rights, the goal of a worldwide digital television standard may be jeopardized by the difficulty of clearing access to all the necessary patents," Futa said.

Since MPEG sets technical standards and does not, per se, deal with intellectual property rights, there has been a consensus for some time within some of the key companies participating in the MPEG process that patent rights clearances would be an issue, Futa noted. They believed that an effort should be started to explore the possibility of establishing a licensing entity to make access to the necessary rights easy and that such access be available on reasonable, fair, and nondiscriminatory terms.