Antitrust Officials Investigate MPEG-LA’s Patent Call Regarding VP8

The Department of Justice, along with the California State Attorney General’s Office, recently began an antitrust investigation into MPEG-LA’s call to various organizations and companies to identify whether they hold any essential patents used by the VP8 video codec. The main concern of the investigation is whether MPEG-LA is simply trying to stifle development and proliferation of the competing codec, as opposed to legitimately expressing concern over whether VP8, which is currently open source, contains patented material.

MPEG-LA is a Denver based company that licenses patent pools covering patents required for use of MPEG-2, H.264 and various other video encoding standards. H.264 is one of the most frequently used formats for the recording, compressing and distributing of high definition video. Both Microsoft and Apple own patents in MPEG-LA’s H.264 patent pool. Additionally, their browsers (IE9 and Safari, respectively) support H.264 and each of these companies has built H.264 into its operating system. MPEG-LA does not charge royalties for H.264 video that is delivered free to end users. However, MPEG-LA does charge royalties for devices that encode and decode H.264. Additionally, MPEG-LA charges royalties for H.264 video sold to end users for a fee.

VP8 is a video encoding format that many agree produces remarkably similar video delivery to H.264. It was originally developed by On2 Technologies. Google, having bought On2 last year, currently owns VP8. Shortly after having acquired VP8, Google responded to calls from the Free Software Foundation as well as others and open-sourced VP8. As such, Google does not collect any royalties whatsoever for the use of VP8. Mozilla and Opera Software have built VP8 support into their browsers. Adobe has agreed to build VP8 capability into its Flash Player plug-in.

MPEG-LA’s patent call is part of an effort to create a joint VP8 patent license. In order to participate in the joint license, a party must contain at least one essential patent in VP8. A team of patent evaluators with MPEG-LA will determine the essentiality of the patent. MPEG-LA has stated that it will only charge royalties for use of a given patent in VP8 after a certain number of years, which it has yet to determine. This investigation is taking place against the background of the World Wide Web Consortium’s (W3C) developing of html5, the next language for arranging and portraying content on the internet. It is still uncertain what video codec html5 will use to display video content. H.264 and VP8 are both considered prospects as the video codec of choice for this future format. Antitrust officials are concerned that MPEG-LA is attempting to frighten other companies from adopting the VP8 standard for fear of having to pay future royalties. MPEG-LA is doing so, officials worry, in order to improve its own position as the video codec of choice for the future.

Whether or not antitrust officials will decide to take legal action is a tough call. Part of their decision will hinge on whether they find that the software comprising these video encoding technologies is obvious; in other words, people could simultaneously and independently develop this technology. Material that is obvious is not patentable. Hence, should officials find the software obvious, they will be that much more likely to find MPEG-LA’s actions legally tenuous at best.