Friday, November 11, 2011

H.264, WebM & X.264 Codec Licensing -- An Overview

As dry as the issue of codec licensing may sound, it is also one of great interest -- primarily because everyone does need to know about the minefield that is licensing, and no one really feels comfortable that they do. Codec licensing is serious business - -and it is seriously confusing. That point was laid bare this past week at the Streaming Media West conference in LA, when an HTML5 panel devolved into a prosaic discussion of H.264 and WebM licensing (including royalties -- when triggered, and how much). For this reason -- because there is great interest and confusion in -- the issue of codec licensing, and because I know quite a bit about the subject (I was an IP lawyer early in my career after all), I am republishing my post from September 2010 in which I discuss H.264 v. WebM licensing (and the overall battle royale between those competing video codecs). The post generated great interest at the time, so here it is -- slightly updated.

, the promise of web and mobile video – HD video delivered anytime, anywhere, on any device. It sounds so easy. But, it isn’t. The overall workflow is complex – and the process from content creation to content syndication is both a technical and business minefield.

One central and critical piece in that workflow -- video encoding and transcoding – is one such minefield, fully appreciated by only a few. This is, in part, due to the fact that it sounds incredibly techie and complex. And, in many respects, it is. But, that doesn’t mean that you shouldn’t understand it. Encoding and transcoding is the process of compressing your video files so that they can be delivered anywhere you want (on the Internet, onto mobile devices). It is a morass, plain and simple -- and it is fraught with complexity, confusion and, yes, peril. This complexity and confusion is only accelerating in this day and age where we see an unending string of new platforms and products – not to mention new codecs, such as Google's sponsored open source WebM codec initiative.

Case in point, the new battle royale brewing between said WebM (and its VP8 video codec) – the burly upstart in this case – and MPEG LA’s MPEG-4 (and its H.264 video codec), the reigning heavyweight champion. H.264 is widely regarded as being the current “gold standard” high quality video codec– it is used by Apple, among others, to deliver pristine HDquality videos (Apple, in fact, is a member of the MPEG LA patent consortium). Google, as we all know, wants to unseat the champ by offering its newly sponsored high quality codec free to the world (I know it sounds incredibly generous, but Google has its own reasons, believe me).

Here’s the crucial rub – MPEG LA’s H.264 isn’t free – it is a royalty-bearing codec that requires a license.

But, you say, MPEG LA announced not too long ago that it will no longer charge royalties for the use of H.264. Yes, it’s true –MPEG LA did previously bow to mounting pressure from, and press surrounding, WebM and announced something that kind of sounds that way. But, I caution you to read the not-too-fine print. H.264 is royalty-free only in one limited case – for Internet video that is delivered free to end users. Read again: for (1) Internet delivery that is (2) delivered free to end users. In the words of MPEG LA’s own press release, “Products and services other than [those] continue to be royalty-bearing.”

But, you may ask (understandably confused by it all), what does that mean to me and why does this matter? Here’s why – any business that publishes and distributes its videos onto the Internet or across mobile networks (and that likely includes yours) is encoding those videos either themselves or, more likely, via a third party encoding service or online video platform (OVP). And – big gulp here -- encoders and decoders are specifically called out in MPEG LA’s press releases as continuing to be fully royalty-bearing. That means that MPEG LA absolutely takes the position that H.264 cannot be used for encoding without a license – and that means royalty payments in certain high volume cases. And, those royalties aren’t cheap – meaning that potential legal exposure for both past and present unlicensed usage can be significant … very significant ... in high volume cases if that license is not obtained.

Now, you and your service providers may take the position that no license is needed from MPEG LA for encoding, because you utilize FFmpeg, the best known open source video encoding solution in the marketplace. Many, if not most, professional encoding services an OVPs, in fact, do use FFmpeg. And, FFmpeg, in turn, features X.264, an open source video codec implementation of MPEG LA’s H.264 royalty-bearing video codec. X.264 is not H.264, so no MPEG LA license is required. Sounds rational, right?

Perhaps, but predictably MPEG LA, its consortium of patent holders and other licensing bodies vehemently – and I mean vehemently -- take the position that open source implementations of their codecs absolutely infringe (remember, this risk is not exclusive to MPEG-LA and its codecs). In their view, there is no free pass! Let’s face it – patent holders and their licensing bodies are in the business of getting paid – they are not in the business of philanthropy. MPEG LA, in fact, continues to make “noises” that even Google’s royalty free WebM gift to the world (which resulted from its acquisition of On2 and its VP8 video codec) infringes the rights of its patent holders. In effect, MPEG LA is telling WebM users “Buyers Beware!” (Surprising, huh, that MPEGLA consortium member Apple and Google disagree on this one?)

Don’t believe those risks are real? Take a look at FFmpeg’s own official website. Right there – in plain sight – FFmpeg not only acknowledges those risks, it expressly cautions its users that any commercial usage (which is what we are talking about here) is at their own peril. Specifically, here is FFmpeg’s official word on the subject in the form of a relevant Q&A that is taken verbatim from its website:

Q: Is it perfectly alright to incorporate the whole FFmpeg core into my own commercial product?

A: You might have a problem here. There have been cases where companies have use FFmpeg in their products. These companies found out that once you start trying to make money from patented technologies, the owners of the patents will come after their licensing fees. Notably, MPEG LA is vigilant and diligent about collecting for MPEG-related technologies.

So, there it is. Right there. Thousands of companies use and rely upon FFmpeg right now to encode their videos (either directly or indirectly via an encoding service or OVP) for commercial purposes without a net; without the codec licenses and royalties that patent holders and licensing bodies contend are needed and must be paid. This is not meant to cause panic – it is simply meant to open eyes to one highly misunderstood and overlooked reality in this highly complex world of web and mobile video.

So, what’s a business to do if its videos are encoded with FFmpeg? Stop distributing those videos across the web or across mobile networks? Absolutely not – video is simply too impactful and, for most businesses, should be a central piece of its customer engagement and monetization strategy.

But, if your business does do video, do it smartly. Cover all your bases. Don’t take short-cuts. Ask questions. Ask your team or encoding service provider if they use officially sanctioned and licensed codecs. If they don’t, then the next question is whether, nonetheless, they have entered into licensing agreements with MPEG LA. If the answers to those two questions are "nyet", then you may want to switch. You are not immune from the risks that they take in the minds of patent holders (MPEG LA confirms this). (To add confusion to this already confusing subject, you also will likely need to pay royalties for the use of X.264 not only to MPEG LA, but also to those companies from whom you are using supported X.264 implementations -- as an example, we have done that at Sorenson Media with our new Sorenson Squeeze 8 product that launched last week.)

At the very least, if you decide that switching costs are too great, then you may want to ask your service provider for indemnification of those risks. But, depending on the size of your service provider, that may be cold comfort.