About Larry Horn and MPEG LA: Larry Horn (American) is Vice President, Licensing and Business Development of MPEG LA, LLC. MPEG LA is a pioneer in one-stop technology standards licensing, which enables widespread technological implementation, interoperability and use of fundamental broad-based technologies covered by many patents owned by many patent owners. MPEG LA provides the marketplace with fair, reasonable, non-discriminatory access to a portfolio of worldwide essential patents under a single license. Its MPEG-2 Patent Portfolio License, for example, now has over 800 licensees and includes more than 650 MPEG-2 essential patents in 57 countries owned by 23 companies and a major university.

MPEG-LA announced in January 2005 its first license related to DRM standards. We took the announcement as an occasion to conduct this e-interview.

INDICARE: Mr Horn, you are Vice President at MPEG LA and also part owner of this company. Could you shortly describe what MPEG-LA does and how it relates to MPEG, the Moving Picture Experts Group at the standardization organisation ISO?

L. Horn: There is no relationship between MPEG LA and MPEG. MPEG LA is a private company in the business of offering patent licenses for the use of various standards including some developed by the Moving Picture Experts Group.

INDICARE: MPEG LA announced its plan for a joint patent license for DRM technology in October 2003. Could you tell us why you started with DRM at that time and use this example to explain the procedure at MPEG-LA?

L. Horn: This is the first step in the plan envisioned by the DRM Reference Model, which first issued in October 2003. The DRM Reference Model envisioned the establishment of patent licenses for various DRM implementations wherever the market might find them an efficient and convenient alternative to negotiating separate licenses with individual patent owners for access to essential patents. Consistent with that plan, the OMA DRM 1.0 Patent Portfolio License ...

INDICARE: ... which covers the DRM standard developed by the Open Mobile Association OMA in its first version ...

L. Horn: ... is the first in a number of DRM related licenses expected to issue in response to emerging market needs. We are also working on a license for OMA DRM 2.0 and Internet music transfer services, among others.

INDICARE: Is there any benefit for consumers from such portfolio licenses?

L. Horn: Yes, the purpose of the OMA DRM 1.0 Patent Portfolio License is to assist in removing the uncertainty surrounding the "patent overhang", which stands in the way of releasing DRM products and services to the mobile sector. And, to the extent these products and services are made available, consumers are the beneficiaries.

INDICARE: What exactly do you mean by "patent overhang"?

L. Horn: Patent overhang refers to the uncertainty on the part of users surrounding the availability and terms of a license under the essential patents required for the use of particular technologies. But in the absence of a joint license providing a convenient and efficient way to access the technology on fair, reasonable terms, the uncertainty may discourage them from its use. The portfolio license was a response to demand from both, providers and consumers to open up markets for DRM products and services. Without efficient access to the essential patents, development and deployment of these might be inhibited.

That's what MPEG LA does and why the acknowledged key patent holders ContentGuard and Intertrust as well as other leading parties have come together. This is about technology to enable new markets, new products and services, new revenue and other growth opportunities. Therefore, the license will assist in satisfying this demand and benefit everyone in the distribution chain – content owners, service providers, device manufacturers and consumers.

INDICARE: According to your announcement from January, you have reached a major milestone this year with an initial group of essential patent holders for the OMA 1.0 DRM standard having reached a tentative agreement for a joint license. Why did you choose OMA as a starting point? Did they contact MPEG LA and point out some urgent need?

L. Horn: OMA DRM 1.0 is being widely adopted in the market, and there is an immediate need for a joint patent license for OMA DRM 1.0. The license is a private marketplace initiative in response to this need. It was not requested or initiated by OMA.

INDICARE: The announcement is worded very carefully. Is there a risk that the partners will not come to a final agreement?

L. Horn: The actual License Agreement, which is still being worked on, will provide the only definitive and reliable statement of license terms. We fully expect the parties named in the announcement to join the actual license agreement, but the final decision of the parties to become licensors is not final (no more or less than in any other joint license situation) until each of them has signed the documents that give MPEG LA the right to sublicense their patents to others under terms of the license and until the license actually issues.

INDICARE: What will be the next milestones? OMA 2.0?

L. Horn: A call for essential patents for OMA DRM 2.0 has been made, patents are currently being evaluated for their essentiality, and a group of initial patent holders will be convened soon to decide the terms of license.

INDICARE: Some people might have been surprised that for such a relatively simple standard as OMA 1.0, already patents from five companies were found to be essential. Was that number in line with your expectations? Or did even more companies submit patents for consideration?

L. Horn: Because of our confidentiality to submitting patent holders, we don't disclose the identities of patent holders who have submitted patents for evaluation – whether those currently being evaluated or those found not to be essential. But, there were additional patent submissions.

INDICARE: Does MPEG LA know from the submission process whether all essential patents are included in the portfolio license?

L. Horn: This is a license of convenience enabling users to take essential patents from multiple patent holders as an alternative to negotiating separate licenses with each. And, while it is MPEG LA’s objective to include as much essential intellectual property as possible for market convenience, participation on the part of patent holders is voluntary. Therefore, not only do we not make any assurances in that regard, but we have not conducted any studies and have no way of knowing who owns essential patents in the absence of a patent submission.

That said, the patents of the named patent holders are well recognized as having extraordinary value in the DRM space, our process for including essential IP will continue throughout the course of the license in order to include as much essential intellectual property as possible, and if a patent holder believes it owns an essential patent, we encourage them to submit it for evaluation and inclusion. If found essential, such patent(s) will be included on the same terms and conditions as the other essential patents without any increase in the royalty rates during the current term of the license.

INDICARE: If the royalty rates are not increased when new patents are added, do the early participants in the agreement have to give up revenue shares in favour of added patents or how does this work?

L. Horn: As a general matter, royalties are normally distributed according to the relative number of essential patents held by each patent owner in relevant countries at the time of each royalty distribution.

INDICARE: How do portfolio licenses such as the one related to OMA DRM handle regional IPR differences? I suppose that not all patents included in the license apply all over the world? Will there be a price differentiation between usage in the US and in Europe, for example?

L. Horn: At this point each patent holder has had at least one patent evaluated as essential, and they will be required under their agreements with MPEG LA to include all of their essential (to OMA DRM 1.0) patents worldwide. Wherever a product is manufactured, sold, received in or transmitted to a country with patents, a royalty is payable.

INDICARE: I understand from your answer that the patents you offer are worldwide patents. But take, for example, a service provider operating only on the German market. He probably won't want a worldwide license. Will there be a way to take out a license for the German (or European) market covering only those patents valid over here or is it take it or leave it?

L. Horn: Although is it true that we offer only one license, I think there may be some misunderstanding how it works, which I will clarify. Each patent is essential to the technology (i.e., infringed by use of the standard), and the same royalty is payable whether one or more of them is used. The benefit of including all of the patents is that licensees have coverage wherever they need it, but again the royalty is the same whether one or more of them is used.

INDICARE: You are probably by now used to complaints about the structure and size of MPEG LA license fees. Why did MPEG LA (or the consortium) choose to demand fees from device manufacturers and service providers, but not, e.g., from software companies producing backend DRM software? And isn't 1 % of revenue – the fee demanded from service providers – quite substantial, when taking into account the low profit margins and the fact that OMA 1.0 offers a very limited DRM functionality?

L. Horn: It is standard practice and widely accepted to collect royalties from the end product (hardware or software) or service provider. Regarding your second question, we disagree. This is a core enabling technology which will create new markets, new products and services, new revenue and other growth opportunities; and its value should be measured against those opportunities. As such, everyone in the distribution chain – content owners, service providers, device manufacturers and consumers – will benefit.

We also know that the patent overhang has been an issue of great concern to the marketplace, and providing a marketplace solution in the form of an OMA DRM 1.0 Patent Portfolio License which allows users to plan for and build these costs into their business models should come as welcome news which will encourage the release of DRM products and services.

INDICARE: One last question: Some people suggest that intellectual property rights issues related to DRM technology are especially difficult and complex. From your experience with other technology standards during the last years, are they right? Is DRM any different?

L. Horn: Every license is different, but I would not characterize one as more difficult and complex than another.

INDICARE: Mr Horn, thank you very much for this interview!


Status: first posted 25.02.2005; licensed under Creative Commons
URL: http://www.indicare.org/tiki-read_article.php?articleId=81