A few days ago, the MPEG LA patent pool announced that it has filed a patent infringement lawsuit against Samsung in the Düsseldorf court in Germany, involving a standard-essential patent for H.265/HEVC and MPEG-H digital video encoding.
The lawsuit is unique in that Samsung was originally the licensor and licensee of the MPEG-LA patent pool, and then "jumped ship" to MPEG-LA's competitor Access Advance (formerly HEVC Advance, or AA) patent pool. This has led to a series of H.265 video encoding patent licensing issues, and the industry's doubts about the AA licensing policy have become increasingly loud. In January, a Düsseldorf court ruled that the AA's license was not in accordance with the FRAND principle.
However, this case once again spreads the problem of the video encoding patent pool before people, especially the double charge problem. Although the AA announced changes to its permission to return policy following the January judgment of the Düsseldorf court, there are still many issues that have been avoided or not resolved, showing no sincerity.
The origin of the problem: patent pool battle and Samsung "job hopping"
Figure 1: H.265 patent pattern
The H.265 video coding patent pattern is shown in the figure above, and the three major patent pools of AA, MPEG LA and Velos are divided into three worlds, ranking first in the number of AA patents, and some independent patentees are free. The formation of this pattern, especially the number of patents in AA and MPEG LA, is largely determined by Samsung. For no other reason than that, Samsung has a strong presence in the H.265 standard essential patents space, as shown in the chart below, Samsung ranks first among AA licensors, with its patents accounting for more than a quarter of the total number of AA patents.
Figure 2: AA Patent Pool Top10 (According to the AA Patent Pool's updated patent list on February 4, 2022)
Between the fall of 2014 and March 2020, Samsung was the licensor and licensee of MPEG LA. In April 2017, Samsung joined AA while maintaining the MPEG LA patent pool. At the beginning of 2020, Samsung terminated its contract with MPEG LA, and along with Samsung, 8 Korean patentees also "jumped ship".
For the reasons for Samsung's "job hopping", FOSS PATENT, a well-known overseas intellectual property blog, has posted that the fees for some AA projects are 4 times that of MPEG LA, and the main purpose of Samsung's transfer is not to obtain more patent revenue, but to obtain licenses for other patents in the patent pool at a very low cost. Not paying or underpaying is far more attractive to consumer electronics manufacturers of Samsung's size than to obtain licensing revenue.
With Samsung's "job hopping", some licensing policies of the AA patent pool have further caused dissatisfaction among implementers, especially the issue of double charges. If you have already paid the patent fee to Samsung at MPEG LA, how to refund the fee after Samsung transfers to AA? In fact, this is not just a problem for Samsung, as shown in Figure 1, AA and MPEG LA have a considerable number of overlapping patents, and the interests of all implementers are compromised as a result. Considering that AA rates are several times higher than MPEG LA, the refund problem is particularly acute. Apple is so far only a licensor and licensee of MPEG LA, and has not signed a contract with AA because it is dissatisfied with the AA's rate structure.
To this end, implementers, including Xiaomi and Turkish TV manufacturer Vestel, have had disputes with the rights holders of AA in Germany. The Düsseldorf court held that the obligation to refund the fee should not be passed on to the licensee and that how the refund should be made should be reflected in the license agreement as an explicit clause.
Policy adjustment: Limited refund OR soup change does not change?
For the issue of double charges, AA's initial treatment was to recommend that licensees licensed by MPEG LA apply to MPEG LA for a refund. In April 2021, the AA made adjustments to this, but the adjustments were quite "skilled" (see below for details). After the Düsseldorf court ruled against the AA in January this year, the AA once again adjusted the refund policy, but in addition to further clarifying that it would intervene in the dispute resolution between the licensor and the licensee and agree to the refund, there was no effective adjustment to some of the core issues that caused the dispute.
Figure 3: AA April 2021 Refund Policy (Partial)
Figure 4: AA March 2022 Refund Policy (Partial)
First, the portion of the fees that AA promises to refund is the "net allocation," which is the share of the license fees received by dual-pool licensors at AA, expressly excluding all fees and other allocations prior to AA's distribution of revenue to licensors. In other words, AA requires that when calculating the refund, the AA's management fee of up to 40% is excluded first, and the remaining 60% is refunded. The licensee pays 100% when paying the fee, but when the refund is made, it has to be refunded according to 60%, and the discount made by the AA to itself is not polite, and the refund becomes a "limited refund". There is no difference between the two versions of the refund policy.
Second, under the AA's "skillful" description, the licensee can only get a refund if the licensor actually receives the license fee share. The problem is that not all licensors' earnings are represented by a share of the license fees. For example, Samsung, the largest patentee in AA, is likely to offset the licensing proceeds with the license fees payable, and thus did not receive the license share. According to AA's policy, in Samsung's case, licensees who are double-charged will most likely not be able to receive any refunds because Samsung may not receive the actual share of the license fee. This is in line with the AA's original recommendations for dealing with the issue.
Third, the AA does not specify how or even whether the licensor will refund the fee if the licensor has already given a separate license or the rights have been exhausted.
Finally, AA's refund policy only applies to the case of joining other patent pools and then joining AA, whereas if you join AA first and then join other patent pools, there is no mention of whether the refund rules apply.
Double charges are already unreasonable, and the refund policy that has been modified several times is still not changing the soup, and it is difficult for AA's position not to be questioned. As the FOSS PATENT blogger commented: "If Access Advance sincerely wants FRAND permission, they will not wait for some future defendant to raise the relevant issues." Rather, it will simply be recognized that, for whatever reason, double charges are not FRAND's. ”
In fact, AA was born out of MPEG LA, and the reason why several major shareholders who created AA chose to be independent was that rights holders such as GE (General Electric) wanted more benefits and were dissatisfied with MPEG LA's "rates and rules". It's no surprise that AA, which represents the interests of the four founders of GE, Dolby, Philips, and Mitsubishi, favors specific licensors in terms of rates and rules. It is precisely for this reason that AA has attracted a large number of large rights holders who advocate patent fees. However, those who remain in MPEG LA are Apple, Xiaomi and many other companies that appear as implementers.
From Apple's boycott to the lawsuits of Xiaomi and Vestel, and now Samsung being sued by MPEG LA, behind it is not only the competition of the H.265 patent pool, but also the game between licensors and licensees. As a large patent implementer, Samsung switched from MPEG LA to AA in order to seek to reduce costs, which not only failed to promote the balance of interests between rights holders and implementers, but also increased the irrationality of AA licensing rules.
For AA, FOSS PATENT once sharply commented: "The patent pool cannot be a Ponzi scheme, and the benefits promised to the first members of the franchise come from the income obtained from those who will lose money." "The essence of AA representing the interests of a particular licensor. For such an AA, it is obviously unrealistic to expect it to turn to FRAND on its own, and FRAND has always needed to fight for itself. In the case that the rates and rules of the AA have not yet been tested by sufficient litigation and precedent, the implementers do not have to rush to "lie flat".