Nero AG, a company with one of the most fitting names ever (can you imagine a company called Hitler or Stalin 2000 years from now?), has filed an anti-trust lawsuit against the MPEG-LA. The German technology company claims the licensing body has abused its monopoly power, and that is has not honoured agreements made with the US Department of Justice. There’s some juicy stuff in here.
Nero’s antitrust argument
Back in 1997, the MPEG-LA sought a promise from the US Department of Justice that it would not initiate any antitrust investigations against the licensing body. The DOJ expressed then that it currently had no intention of acting upon the MPEG-LA, but this lack of intention was conditioned on a number of things.
First, the MPEG-LA would engage with independent experts to ensure only essential patents would be placed in the MPEG-2 pool. They told the DOJ that the MPEG-2 pool constituted of 53 essential patents. Second, independent experts would “weed out nonessential patents” from the pool. Third, licensing terms would be “fair, reasonable, and nondiscriminatory”.
Nero claims none of these safeguards were honoured, and here’s where it gets juicy; “absolute power has corrupted the MPEG-LA absolutely”, according to Nero. First of all, the so-called independent expert was anything but independent. The expert helped form the MPEG-LA, helped in drafting the first MPEG-LA licensing agreements, answers questions from licensees on behalf of the MPEG-LA, has attended business settlement meetings on behalf of the MPEG-LA, and has testified before US congress on behalf of the MPEG-LA. Heck, he is listed on the MPEG-LA website as “MPEG-LA’s US patent counsel”.
Nero also claims that the MPEG-LA has unlawfully extended its patent pools by adding non-essential patents to the MPEG-2 patent pool. Even though the MPEG-LA told the DOJ there were only 53 essential MPEG-2 patents, the non-independent expert added round and about 800 more patents to the pool, extending the duration of the patent pool, since the old, 53 essential patents expired.
“On information and belief, MPEG LA has similarly extended the duration and scope of its monopoly power in the relevant technology markets for the licensing of patents relating to the MPEG-4 Visual and AVC [H264] standards by adding nonessential patents to its MPEG-4 Visual and AVC pools, which now contain more than 1000 and 1300 patents, respectively,” Nero further claims.
Nero further claims that the MPEG-LA has “formulated and imposed licensing terms that are unfair, unreasonable, and discriminatory”, by charging different royalty rates from licensees for the same MPEG-2 license and by not making any downward adjustment in line with the “rapid and dramatic” decrease in costs of implementing the MPEG-2 standard. In addition, the MPEG-LA collects royalties for the same device multiple times (internal hardware, software, monitor, etc.), and the licensing body has failed to “communicate its policies equally to all licensees”.
Nero argues that these things combined have led to the MPEG-LA having 100% market share, since every device or piece of software even remotely related to video needs a license from the MPEG-LA. The MPEG-LA itself has estimated that in 2006, the value of MPEG-2 products (so just that one license pool) exceeded half a trillion dollars.
Nero also tries to ride the Main Street wave by highlighting the exorbitant bonus culture within the MPEG-LA, which ensures “Enron-esque” salaries to C-level officers, including expensive apartments and sports cars (a Porsche, though? Seriously? So apart from being patent trolls, these guys also lack any form of taste), which Nero claims to reflect a “culture of greed”.
“Such a culture may have driven, and may still continue to drive, MPEG LA’s wilful maintenance or extension – and other abuses – of its monopoly power to maintain cash flows necessary to maintain the lifestyle that has accompanied such culture of greed,” Nero claims. All we need now is Joe the Plumber.
A large part of the suit focuses on the concept of trial software, which, as most of you will know, is an important part of the software industry. Before purchasing a license from the MPEG-LA, Nero asked if trial software would constitute a sale – the licensing body said no. At numerous other occasions, the MPEG-LA confirmed this answer “verbally, in writing, and by conduct”. Then, in February 2008, the MPEG-LA reversed this position abruptly, demanding royalties for trial software, thereby defying the licensing agreements. The MPEG-LA then sought to use the New York Parol Evidence Rule to hide evidence from the court regarding the parties’ agreements on this subject.
“Therefore, MPEG-LA’s unlawful actions have caused, and will continue to cause, Nero irreparable harm for which it has no adequate remedy at law,” Nero concludes, “In sum, MPEG-LA’s predatory and abusive conduct has caused antitrust injury to innovation, competition, and consumers in the relevant technology markets.”
MPEG-LA’s response
According to the MPEG-LA, Nero’s case is nothing special. “I think we’re looking it as a typical response by a company that has not abided by the terms of the license they’ve taken,” said Sullivan & Cromwell’s Garrard Beeney, the lawyer representing the licensing body in this case. He states this is pretty common in license fee disputes.
Conclusion
And this is the organisation the pro-Apple/MPEG-LA/H264 lobby wants to hand over video on the web to. We already established the MPEG-LA is headed by a clear-cut patent troll, and it seems that if any of the stuff in Nero’s complaint is true, we’re dealing with a company much more damaging than a mere patent troll. While I’m not a particular fan of the whole greed culture wave Nero tries to ride, the remainder of the complaint is made up of verifiable information – information that we were actually already aware of.
The MPEG-LA constitutes a major threat to not only video on the web, but also the digital video industry as a whole. The MPEG-LA stifles innovation and places unnecessary costs upon consumers and the industry as a whole. This must end. Just as we don’t want Microsoft to abuse its monopoly position, we shouldn’t want the MPEG-LA to do so either.
I skimmed through the pdf… Wow! This is a pretty meaty document, full of details and well written. This is going to be interesting. Maybe I should pick up a Nero licence for my Linux box 🙂
Picking up a license for Linux might be a good idea. Picking up any license at all for them might be a good idea, as a matter of fact.
I doubt they have deep enough pockets to go against Apple et al., so they’ll need (y)our cash. It’s worth it though. I’d love to see the guys and gals from MPEG-LA go flat on their faces.
Thom, can you guys please implement OpenID for this site?
Hold on!
Apple != MPEG-LA!!!
also
Microsoft != MPEG-LA
Both of them PAY MPEG-LA royalties because they are afraid of getting sued! It would be in Apple’s and Microsoft’s best interests if there were no MPEG-LA extorting money from them. Apple chose to support H.264 for basically two reasons, 1: they pay MPEG-LA royalties, so they won’t get sued, if they used some other codec, they could potentially get sued by MPEG-LA, basically. And 2: they have a really good decoder for H.264, it would take a lot of time and money to implement decoders as good for other codecs.
Apple and MS are both patent holders in the H.264 patent pool. That means they get a cut of the royalties.
Which probably means that pay almost nothing for h264 when one weighs up royalties versus payments.
They both seem to have a thing for non level playing fields.
At least MS, while not implementing native support for WebM on IE, is not blocking it either.
Apple hasn’t blocked it either; hardly Apple’s fault if people aren’t producing a VP8 plugin for QuickTime.
Apple has been spreading FUD against VP8, claiming that they are gathering patents to destroy it.
I think that’s QUITE different from Microsoft’s response!
No, both Microsoft and Apple are members of the MPEG LA gang (along with Sony, Dolby, and a few others). They collect royalties from other companies using H.264 (and try to sue competing formats). That is why Apple and Microsoft refused to implement Theora decoding in their browsers (Safari and MSIE). They already pay MPEG LA to be allowed to use H.264, so there wasn’t even any risk of being sued. They refused to support the open format because they get royalties from the proprietary one, and neither of them knows how to compete on a level playing field.
Google, Adobe, Mozilla, and Opera, on the other hand, are not members of MPEG LA (and only the first two pay the H.264 “protection money”).
I’ve been buying a Nerolinux license since their first release. Originally motivated by wanting to support company’s investing in Linux ports I continually buy it because they’ve done a great job with the software. While the open source Brasero and K3b work ok Nerolinux is very good. It’s not bloated with crap like their Windows port and it’s only $20.
I very highly recommend people supporting them not only for the principle but it also being an excellent product.
it’s time for things to change, with 100% market share we are already in a big prison made by Mpeg-LA.
Thanks Thom for reporting the news
– the internet an open platform, where _everybody_ can make great things happen
– all the software needed can be freely obtained
– where hardware can be useful just by supporting this open platform
With the introduction of VP8 that at least has a chance of happening, which is awesome. My guess though is that the MPEG-LA will fight that future with all they’ve got.
PS. Red Hat Legal cleared VP8 for Fedora.
Um, sorry, that died when the Interwebz went out of government and educational institutions, and was overtaken by businesses.
Don’t hold your breath.
“MPEG-LA sought a promise from the US Department of Justice that it would not initiate any antitrust investigations against the licensing body”
I admit I’m not exactly up to date with the US legal system being European and all, but does anybody else finds this completely apsurd or is it just me?
Since when can private entities seek any kind of reassurance from the federal government that they’re safe from investigation/prosecution? And if they do obtain it, how much time does it have to pass for the justice system to be able to look into their business once again?
I would very much like to hear an American explain this.
I’m no legal expert, but as I see it companies can ask for whatever they want, however ridiculous. RIAA/MPAA anyone?
With that said, just because a company asks for it doesn’t mean they ever had a hope in hell of actually being granted their request.
In the case of the MPEG-LA seeking antitrust immunity from the DOJ, it seems that all the DOJ did (after laughing that a company could be so arrogant) was outline what the company could do to avoid violating US antitrust laws.
Kinda like a kid asking not to get punished for doing something bad, and the parent responding that bad children get punished, and then teaching the child how to be good.
*grabs some popcorn, and gives buckets to other people for free*
The more gigantic and absurd the patent war becomes, the quicker a much-needed revision of the patent system to make it fit the needs of the software world is going to happen.
Moreover, these guys have got some excellent argumentation skills that would almost compensate their generally horrible desktop software (at least it was last time I checked). This is what I call great news !
Edited 2010-05-24 12:01 UTC
There used to be a time when Nero was stable, fast, and very capable.
Shame it sucks lately, but at least the company is fighting the good fight in the patent war…
Ya know, I used to be a loyal user of Nero, but then they starded selling their CD/DVD burning app as part of a huge bundle with a bunch of shit that I didn’t want or need, and that was the only way you could get it (aside from OEM versions). At around the same time, free burning tools like CDBurnerXP and Infrarecorder showed up on the scene.
So when Vista came out and the version of Nero I had wasn’t compatible, figured I’d try out some of the free tools and I’d purchase the new version of Nero only if I needed to. Well, that was about 3 years ago and I have never looked back. Between the programs I mentioned above plus ImgBurn, I haven’t had a need for Nero yet.
I see now that they’re selling the Burning Rom application separately, but is there really any need for it anymore? Meaning, does it do anything else that the free apps don’t?
Well, it probably works 100% of the time in Windows 7 64, which CDBurnerXP and Infrarecorder don’t…but ImgBurn does that, so…
…and then, of course, there’s K3b, for the *n*x universe.
Well since Thom tries to make MPEG-LA bad by using Nero case as fact lets bring some intresting points from MPEG-LA response.
Earlier this year, MPEG sued Nero for breach of contract when it stopped paying to license technology that’s part of the MPEG pool. Nero’s suit was a standard countermeasure.
First try to skip license payments then accuse them monopoly. Sounds like company that isn’t doing so well.
Beeney, who will be defending the case with his colleague Michael Steinberg, told us that similar allegations against patent licensors have been rejected by various jurisdictions, including the U.S. Court of Appeals for the Federal Circuit in Princo v. U.S. Philips.
So blaming monopoly isn’t new strategy and it has failed before.
Ofc you have choice to either believe someone who is completely biased, Thom, or real press who don’t pull such a childish “patent troll” crap on every possible point.
Or, you read Nero’s account and learn WHY they stopped paying. How ’bout that?
So, stating something that is 100% true (namely, that Larry Horn is a patent troll), is not “real press”?
Weird idea of “real press” you have.
Edited 2010-05-24 12:44 UTC
Obviously you lack the ability to do basic research like, you know, reading the actual complaint Nero filed. If you had bothered to do that instead of just believing whatever tripe your buddies in the MPEG-LA choose to feed to you then you might have noticed that MPEG-LA
1) Changed the definition of what constituted a sale, contradicting previous agreements with Nero.
2) Demanded royalties retroactively for years-worth of sales.
A suit of this nature might be reasonable and normal for Nero if only 1) had occurred, but given 2) it is absolutely essential.
How would you feel if your land lord came to you and said “I’m raising the rent on your apartment by 80% and I’m doing it retroactively since you moved in, so you own me 80% more per month since you’ve been here. With interest. Here’s a bill, now pay up!”? Most people could not afford that, as Nero likely cannot afford it.
Edited 2010-05-24 17:37 UTC
I’m tired of all their crap about having patents on every conceivable method for making codecs.
Hey, Maybe Google, Opera, and Mozilla can pitch in or something. Like they did with that browser ballot thing in Europe.
Apart from the ballot screen being Microsoft’s own idea…
Google, Opera and Mozilla all oppose software patents, and have explicitly stated that they will only ever use patents defensively.
What I trying to say was that they would team up with Nero in the Antitrust case against MPEG-LA like they did with Opera’s case against Internet Explorer.
Wow, I love the h264 codec, it’s really the best audio/video codec out there.
However MPEG-LA was – and still is – an horrible organization that have unclear and obviously unfair policy…
The simple fact that they can’t precise their licensing policy after 2015 made them evil for business and end-users…
However the MPEG-4 norms including h264 are internationals standards and the MPEG-LA is only responsible for collecting money from the licensing… where patents apply…
Thus I see 2 things:
– First: Web sites hosted in country where software patents don’t apply shouldn’t have to care about MPEG-LA and h264 licensing (please correct me if I’m wrong)
– Second: the action by Nero may lead to make MPEG-LA clarify it’s licensing policy in the long term. And hopefully, non business use of the h264 codec will remain free as it is now.
It’s only make sense that international standards must follow some rule regarding the licensing as it create some king of monopoly.
And having to switch to the inferior VP8 codec is shameful… and not always possible…
Actually, just to clear things up, H.264 only handles video. It has nothing to do with audio, you can pair any audio codec you wish with H.264 provided the container you choose supports that.
True, the content providers in a lot of countries don’t have to care. However, according to MPEG-LA, they can go after *anyone* in the chain, from distributor all the way down to the viewer. So in theory, even if they can’t go after the web site in a non-patent country, they could go after a viewer in the US who visits that page for example, as their patents apply there. Now, would they actually do such a thing? That is the question. They’ve vaguely hinted they would, but even if they did I doubt most courts would even hear such a case. Just because MPEG-LA threatens doesn’t make their threats legal, however it could cost more money to fight them off than the average person typically has.
Your right, I was referring to the other MPEG-4 standard that do the job, ie: AAC for audio and MP4 as the container.
And by the way, it’s a shame that there’s no good open-source AAC codec…
Well, I don’t think that the end-user is taking any risk by watch h264 Video that does’t have been encoded with MPEG-LA approved codec (ie: licensing fee…)
1) They recently explain that they have never sued any end-user…
2) End user actually have been given the license to watch h264 movie
3) End-user can’t decently know whenever a movie have been encoded with a MPEG-LA blessed codec… thus as you said, this will probably hard to support any legal action for MPEG-LA…
They talk a lot… who really know the truth ??
As for money, I think this is the primary reason with end-user are safe: individually there are potentially violating a license that cost… $0! I don’t think any sane justice make big case for that…
Any way it seem that the treat is working… the Godfather way…
And the point of Nero AG is that MPEG-LA abuse of their dominant position to impose unfair licensing term.
Typically, the treat to the end-user is unacceptable…
a Porsche, though? Seriously? So apart from being patent trolls, these guys also lack any form of taste
My advice, Thom? Stick to reporting on technology, not on cars. 🙂
Disclaimer: I take it back if it was a Cayenne.
It was most certainly a Cayenne.
*Buuurn theeeem!*
Nero, while your software has become large and bloated, your heart is in the right place. Go get em.
Clever indeed.
I think this just might have a chance of working. Consider that MPEG-LA holds a stranglehold on virtually any form of video, in that their patent portfolio is so broad and vague that there really is no way of compressing video that does not violate one of their patents — this is by definition a monopoly of the worst kind. MPEG-LA wanted a monopoly on video, and they got one, problem is monopolies are illegal.
Surprising that no one ever thought of this before.
I sincerely wish Nero AG all the luck with this.
In the USA, having a monopoly is not illegal.
However, once you’ve been labeled as such, there are antitrust law stipulations you must consider to assure you do not use your market position to unfairly restrict competition.
I think most would argue that MPEG-LA is effectively (and probably unfairly) preventing competition here by claiming that they “own” patents on every conceivable codec that would be produced. Furthermore, they appear to have been making license deals with major players in the market to “lock-in” their patented format with FUD and threats of legal action so that there can be no other options available.
http://en.wikipedia.org/wiki/Stalin_(Scheme_implementation)
Apparently, “Stalin brutally optimizes” was the idea. However, I would have thought that the name would have a large enough stigma attached to it that no one would dare use it…
Offtopic rant:
Why the stigma? For Western Europe and the United States, Stalin was “good old uncle Joe”, who helped us win the war against them goddamn nazis, until, sadly he became the adversary afterwards. Moreso, if you were a communist in that part of the world. Therefore, the name carries only a historical value, just the same as, say, Nero.
Not for us pesky Eastern Europeans for whom the name has a bit…more delicate sense, to say the least.
Now, if somebody in France or US would name their pet project “Hitler”, that’d raise some eyebrows…
Errr… I’m sure that this as already been done. Be it only for the sake of making a Godwin point
(After all, NVidia copyrighted Fermi’s name without anyone raising an eyebrow, so everything is possible in the world of naming)
Edited 2010-05-25 07:50 UTC
He might have been thought of fairly well during WWII, but after he essentially became the enemy post-WWII and it became clear to the general public just how nasty he was (I’m not sure how well it was known to the other Allied government officials), he was definitely not thought of positively in the US. I’ve heard it said many times that Stalin was responsible for more deaths than Hitler. And I think that most historical accounts that you’d run into these days talking about allying with Russia in WWII will say that the US didn’t expect to be on good terms with Russia post-WWII and that they allied with them pretty much out of necessity.
I don’t think that Stalin is viewed anywhere near as negatively as Hitler at this point, but he’s definitely viewed as a tyrant and quite negatively in the US – enough so that I wouldn’t expect anyone to use the name for anything.
Nero, on the other hand, is so far back in history, that your average American is lucky to even realize that he was an Emperor of Rome or associate him with it burning. The more educated will likely know, but he’s pretty much purely historical at this point. Stalin, on the other hand, is too recent and was too nasty for him to be viewed purely historical yet – though I imagine that it will happen to him far sooner than Hitler.
Hopefully MPEG-LA will end up as a big smoking crater.
*** HAIL NERO! ***
If you read http://x264dev.multimedia.cx/?p=377 I noticed some of the algorithms he mentions as being copies from x264, where discovered by people who died over 30 years ago!
How is it that MPEG-LA has patented a dead persons work for use in video encoding? How can anyone patent a math formula period?
It seems almost as if the only way to patent h264 would be to never reveal the source.
Shades of SCO…
USA as an economic superpower is going downhill fast. The day when the legal shit costs more than the revenue from being present in the US companies (and countries?) will pull out.
MPEG-LA isn’t about some poor inventor making discoveries in his basement. These are just trolls. There should be no software patents.
I can see the US govt arguing this is a way to keep money coming in when factories go abroad, but it kills entrepreneurship which is much worse. Domestic Chinese companies can focus on doing products instead of legal battles.