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MPEG-4 License Fee Under Attack

14 Mar, 2002 By: Holly J. Wagner

Video compression technology company On2 Technologies Inc. has petitioned the federal Department of Justice (DOJ) to investigate whether the group of companies that make up MPEG LA violate federal antitrust laws.

"MPEG LA has, in essence, established a monopoly in the digital broadcast video compression market through the department's 1997 approval of the MPEG-2 patent pool," wrote On2 Technologies president and CEO Douglas A. McIntyre. "It is now attempting to use this monopoly to ram unreasonable fees down the throats of consumers and businesses that use the Internet or Internet related protocols for the delivery of video."

"They both misunderstand the law and the Justice department's reason for a business review letter," said MPEG LA attorney Garrard Beeney. "I don't anticipate any further communication from the Justice Department."

McIntyre's letter is also the first high-profile assault on MPEG LA's proposed pricing structure for using the technology. The proposed pricing is 25 cents per enabled hardware device and $0.00033 per minute – about 2 cents an hour – for information streaming or downloading.

"The potential impact on a home watching eight hours of television or streaming Internet video per day is roughly $5 per month, McIntyre told Assistant Attorney General Charles James. He goes on to say that MPEG LA companies "hold at least a 95 percent market share in the digital television video compression market."

"Although MPEG LA characterized MPEG-2 as an international video standard in its 1997 proposal to the department, MPEG-2 is not really a standard but one of many forms of video compression technology," McIntyre explained, citing existing patents that private enterprises like Microsoft Windows Media, RealNetworks, On2 Technologies and Sorenson hold.

"It appears that a key underpinning of the 1997 Department approval was the need for, and positive effect of, an international video compression standard," he concludes. "What might not have been evident in 1997, but is clearly evident now, is that today's technology allows for streaming multiple standards of compression technology over the same platform. Maintaining multiple compression standards will also obviously work to drive down prices and increase consumer choice."

Beeny disputed the idea that MPEG LA would use licenses for one compression standard as a lever to persuade licensees to use the other standard.

"I think if you really had a serious issue to raise, you don't write a letter, put it in a press release and send it around," said. "I think their letter shows they don't understand the MPEG-2 and the current status of the MPEG4 licensing."Tom Huntington, spokesman for Divx Networks (whose products support several of the streaming platforms), said the On2 letter is an attempt to carve out a niche in the industry.

"They're positioning themselves as a competitor to MPEG-4 for and good luck to them," he said. "We as a company believe that MPEG-4 as a standard holds great potential. There are some very complex licensing issues that have yet to be worked out, though. We're a long way from having final licensing terms."

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