Can AV1 and HEVC just get along?
`1 message
`
`Kevin Jakel <kevin@unifiedpatents.com>
`
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`United Patent, LLC. Ex. 1048 Page 1 of 12
`United Patents, LLC v. Elects. & Telecomm. Res. Inst., et al.
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`36
`
`Feature | Analysing the leading HEVC patent pools
`
`May/June 2018
`www.IAM-media.com
`
`What will TV cost you? Putting a
`price on HEVC licences
`
`Changes in how you watch movies, stream TV and use video chat are on the way. These
`will fundamentally affect the economics of how content is delivered to you, as well as
`the way that the patents underpinning the enabling technology are licensed
`
`By Erik Oliver and Kent Richardson
`
`The compression algorithm is a piece of critical
`
`technology that enables users to view videos on a
`phone or a computer and now there is a new one
`coming our way: HEVC.
`How important is the commercial adoption of this
`new compression technology? Without compression,
`the movie Thor: Ragnarok – which is 130 minutes long –
`would be 11.6 TB. With current compression technology
`that same movie is about 27 GB; with HEVC it is
`approximately 14 GB (see Figure 1). Thus, HEVC
`can help consumers to save limited mobile data and
`businesses to cut costs on data storage and transmission.
`All while delivering equal – or better – quality video.
`However, there is no point pretending that
`compression technology is easy. The math makes your
`head spin, the trade-offs are tortuous and the metrics
`to decide what looks good – whatever that means – will
`make you question why you ever asked. The implications
`for chip designers are staggering. Hundreds of billions
`of dollars of semiconductors are produced with specially
`designed circuitry and instructions for optimising video
`compression and decompression. Those semiconductors
`are built into billions of devices every year. How much
`circuitry are we talking? We estimate that for 2018, if
`you divide up all the transistors manufactured for video
`compression, there would be 4,000 transistors per ant.
`(There are about 5 quadrillion ants in the world.)
`Broad industry adoption of HEVC was kickstarted
`by Apple’s July 2017 announcement that its iOS 11
`would natively support HEVC. Apple’s membership of
`AOMedia became public as of the time of writing. It
`is too early to tell whether this membership will cause
`Apple, and others, to shift away from HEVC adoption.
`There are multiple reasons for slow adoption but a
`complex and expensive patent licensing landscape with
`three major licensing groups may be one. Compared to a
`peak price of $0.20 per handset for an AVC patent pool
`licence, a consumer electronics manufacturer planning
`to make a handset that supports HEVC would be facing
`an estimated $1.60 per handset charge to license HEVC
`from the three pools. There would also be additional
`royalties for owners of non-pooled patents, which we
`estimate would bring the bill to $2.25.
`One possible reason for the proliferation of licensing
`groups is that historically, licensing patents around
`audio/video compression has generated billions of
`dollars in revenue. Further, the patent battles are
`slated to continue with the latest HEVC standard. If
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`your company plans to support HEVC, this will be
`complicated. Solvable but complicated.
`This article aims to provide an understanding of the
`history of HEVC, video compression standards and
`the associated patent licensing landscape. Given the
`complexity of this subject, it focuses on providing a
`starting point to guide companies through some of the
`relevant patent licence issues. We are not playing favourites
`among the pools nor are we criticising any one pool or
`its policies. Rather we have focused on the perspective
`of HEVC adopters – the customers of the pools. How
`will they view the pool’s stated rates and policies? With
`that, we will look at how the pools, their pricing and the
`licences might affect adopters’ profits and costs.
`
`Brief history of video compression
`While HEVC is the sixth major ITU standard for video
`compression, it is also the third video compression standard
`jointly worked on with the MPEG (operating under the
`ISO and the IEC). Table 1 provides a brief overview of key
`video compression standards from the ITU and MPEG.
`Each of these standards has targeted delivery video at
`lower bandwidth requirements, generally at significantly
`higher quality. MPEG-2 was notable for its adoption as
`the standard format for digital TV broadcasting and in
`DVDs. HEVC has now been adopted for the next
`generation of digital TV broadcasting (ATSC 3.0 in the
`United States). Table 2 highlights several technical
`improvements between most of the successive video
`standards discussed in Table 1.
`Each of the standards builds heavily on those that
`came before. Thus, the 2013 HEVC standard does not
`stand alone; rather, many of its fundamental concepts
`relate to the approaches selected for H.261 back in 1988
`– which provides its own set of patent licence challenges.
`For example, HEVC builds on the macroblock concepts
`that date back to the 1988 H.261, while adding new,
`more refined capabilities for segmenting those
`macroblocks. For those interested in a more in-depth
`technical analysis of the standards, the presentations and
`papers by Gary Sullivan are a good starting point (see
`Google Scholar: https://goo.gl/QrNzhA).
`One further point: standardisation is critical to the
`technology industry and the video encoding space in
`particular. By standardising the video encoding stream,
`more devices can interoperate, which leads to the
`promised value highlighted by Intel’s former CEO,
`Craig Barrett: “[w]hen you have common interfaces,
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`in May/Junezom
`www.lAM-medla.com
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`Analysingthe leading HEVC patent pools | Feature fl
`
`_
`'
`Glossary of abbreVIatIons and key terms
`
`- AOMedIa: the Alliance for Open Media.
`. ASP: average selling price.
`- ATSC: Advanced Television Systems
`Committee, developerofstandard forever-
`theair digtal television In the United States.
`- AVC: advanced video coding, altematlvely
`H.264 or MPEG-4 (part 10).
`- FRAND: fair, reasonable and non-
`discriminatory.
`- HEVC: high efficiency video coding,
`alternatively H.265 or MPEG-H (part 2).
`- HEVC Advance: private company — HEVC
`Advance ur: - based In the United
`states that serves asa patent licence
`administrator for an HEVC pool.
`. ISO: the International Organisation for
`Standardisation.
`. IEC: the International Hectrotechnlcal
`Commission.
`- ITU: the international
`Telecommunication Union.
`- LTE: long—term evolution technology.
`
`MPEG: the Moving Picture Expert Group.
`MPEG LA: a private company— MPEG LA.
`LLC — based In the United States that
`serves as a patent licence administrator
`for many pools, Including the MPEG-2
`pool, the AVC pool and an HEVC pool.
`NDA: non-disclosure agreement.
`NTSC: the previous US standard for
`analogue broadcastTV, named atterthe
`National Television System Committee.
`SEP: standard-essential patent.
`US Patent and Trademark Office.
`VC-l: a standard originally developed by
`Microsoft for Windows Media Video 9 but
`standardised by the Society of Motion
`Picture and Television Engineers (SMPTE)
`as SMPTE 421; It Is also supported by
`Blu-Ray discs.
`Velos: a private company — Velos
`Media LLC - based In the United States
`that serves as a llcensor and licence
`administrator for an HEVC pool.
`
`common protocols, then everyone can innovate and
`everyone can interoperate. Companies can buildtber'r
`burinma, consumers can expand their choices, the
`technology moves forward faster, and users get more
`W (emphasis added). Contrast this with the problem
`ofincompatible technologies where hardware for one
`format (eg, Betamax or HD—DVD) could not work
`with another (eg, VHS or Blu—ray). It is expensive for
`content providers and others in the ecosystem to support
`multiple formats. It is generally preferable to have fewer
`divergent standards, as well as higher-quality standards.
`We will provide a brief history ofvideo patent pools
`before turning to the compression capabilities of each
`of these video compression standards, as well as known
`licensing fines ofestablished pools, in the context of the
`ever-changing consumer electronics landscape.
`
`TABLE 1. Overview of key video compression standards
`
`Standard
`
`H.120
`H.261
`MPEG-1
`
`Publication Commentary
`year“
`1984
`1988
`1993
`
`Early compression technique, not widely adopted.
`Often viewed as basis of modern video compression techniques
`
`Inherits many feaiurm from H261 while adding several
`technI-l features.
`
`H.262/MPEG-2
`H.263
`
`1995
`1996
`
`Used In DVDs and broadcast digital TV, high similarityto (MPEG-)i.
`Many similarities to MPEG-1 and H.261 with enhanced capabilities
`Used In videoconferencing systems Interrelated to MPEG4 (mt
`2) [1999),whirh has H.263 bmeline with additional features.
`Firsttest models In 1999, drafts in 2002;widely adopted on the
`Internet and mobile devices, as well as Blu-ray players.
`Firsttest models In 2010. drafts In 2010-2012; selected for use In
`nod-generation digital 1v (eg, ATSC so).
`‘Publirflionyuofiifiversionofstandardbyfl'luorlsm
`
`H.264/MPEG-4 2003
`(Pait 10)/AVC
`H.265/MPEG—H 2013
`(Part2)Ii-IEVC
`
`FIGURE 1.Video compression reduces data requirements
`by 1.000x
`Thor: Ragnarok. a law-minute uncompressed movie. 11.600 GB:
`
`
`
`Compressestbl? GB currently And down to 14 GB with HEVC
`
`\fideo patent pools: history
`While HEVC is the sixth major standard from the
`ITU, it is the third major video coding standard to have
`a patent pool associated with it. The first — MPEG
`LA's MPEG-2 pool — was notable for being widely
`adopted (it was used in digitalTV — including the
`ATSC standards in the United States — and also used
`in DVDs). MPEG LA provided a one-stop shop for
`clearing the overwhelming majority ofpatent rights for
`use ofMPEG-2. For decoding hardware products (eg, a
`TV, DVD player or computer), the rates were:
`0 $4.00 (inception in approximately 1997 to 2002);
`. $2.50 (2002 to 2010);
`. 32.00 (2010 to 2015); and
`0 30.50 or $0.35 (2015 onward).
`
`The rates and pricing remain controversial. For
`.IIPIC, in August 2017, Haier — a large consumer
`electronics maker and an ATSC and MPEG—2 licensee of
`MPEG LA — filed suit over the rates (see Haiti/Interim
`Trading LLC v Sammng, Case 1:17-cv-921, NY Northern
`District, August 21 2017 — the suit covers both the
`ATSC and NIPEG—Z patent pools operated by MPEG
`LA) The Haier suit raises questions about the (lack
`of) effectiveness ofthe screening process for including
`patents, inclusion of non-essential patents, the pricing
`model (flatfeeversusscaledbydevice cost,especiallyin
`the face of declining device costs) and antitrust concerns.
`One of the complaints in Haier concerns the addition
`ofpatents to the pools over time. This will not surprise
`astute observers of the video standards world. NTSC
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`a Feature | Analysingthe leading HEVC patent pools
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`Hay/Juanita kn
`www.m-medlaicom
`
`encoding for analogue TV signals in the United States
`was first promulgated in around 1941 (for black and
`white TVs) and then modified in around 1953 to add
`colour. Nonetheless, patent licensing for improvements
`onNTSC hadamuchlongerlifethanZOyears,even
`given the addition ofcolour.
`Nonetheless, the fact that there are live patents after
`more than 20 years should raise questions that require
`answers from patent owners. Thus, even MPEG—2 —
`which is now over 20 years old — was not completely
`unencumbered by patents in 2017. MPEG LA continues
`to run a licensing pool for MPEG—2 that included seven
`unexpired patents as ofJuly 2017 and charged $0.50
`per device for a patent licence (notably, the remaining
`patents have early priority dates in this case but greater
`than their 20—year lives due to country-specific laws
`in the United States, Malaysia and the Philippines) A
`lower—priced $0.35 tier is also available for companies
`that waive early termination rights.
`The issue oflisting patents with priorities post-dating
`thestandardcanbeatleastpartiallyansweredzstandards
`are not fixed in time. Even the MPEG—2 standard has
`been amended since its 1995 release, with the most
`recent amendment dating from 2012. Also, the vast
`majority ofpatents historically in the MPEG—2 pool had
`priority dates falling roughly between 1990 and 1995.
`Thus, any late patents may actually represent innovations
`related to amendments to the standard.
`
`Turning away from MPEG—2,we arrive at the second
`widely adopted video coding standard: AVC.
`MPEG LA also served as the administrator for the
`
`AVC patent pool. 'lhe rate is $0.20 per device but there
`are some volume-based pricing tiers, as well as a eap
`on total licence fees. Compared to NIPEG—Z, the AVC
`patent pool was more affordable. (See “Other issues"
`
`boxout for a discussion on whether the AVC pool rate
`was set artificially low.)
`Bear in mind that ifyour device supports multiple
`standards,you will need to license each one separately.
`So for a device that supports MPEG—2, AVC and
`HEVC together, you would need to pay the fees for
`each separately to the appropriate administrator(s) or
`independent patent owners.
`Before exploring the HEVC patent licensing
`landsupe in more detail, the backdrop ofthe changing
`consumer electronic» landscape merits investigation.
`
`Consumer electronics: pricing and performance
`under Moore’s Law
`Discussing video compression standards without
`reference to the changing consumer electronics landscape
`an be challenging. Consumer electronim, particularly
`computers, exist against the backdrop ofMoore's
`Law which, loosely speaking, predicts that computing
`capabilities double in performance every two years.
`Figure 2 shows trends for computu prices from 2002 to
`201$.The downward pressure on personal computer prices
`—evenintheficeofinflation—isextreme,withtheprice
`ofa computer dropping from 31,0“) to 8277 from AVC's
`launch in 2003 to HEVC’s launch in 2013. Significantly,
`a 3277 computer bought in 2013 is signifieantly more
`powerfiillhanitsmoreexpensivem3 predecessor:
`Figure3showstheprocessorperformanceovertheperiod
`from 2002 to 2015 in millions of instructions per second
`(MIPS). Around the time that AVC was launched,
`processors were clocking it at about 10 MIPS, but by the
`time of HEVC's launch 130,000 NHPS processors were
`readilyavailable.'lhus,overthe same 10—yearperiodwhere
`the computer dropped in price by nearly one-quarter, the
`processing power available went up by a Factor of 10,“.
`
`TABLE 2 Key improvements of ma} orvideo standards
`
`H.261
`MPEG-1
`H262/MPEG-2 m H264/AVC
`H265/HEVC
`- Macroblodlmotion
`H.261featuresplus
`MPEG-lfmturesplus
`H.263plusMPEG—l/2
`H.263featuiesplus:
`H.264featuresplus
`compensation
`- Bl—dlrectlonalmotion
`- Interlaced—scan
`featuresplus
`- Codingefliclency
`- ngll-levelstrucuire.
`- Dlscreteooslne
`prediction
`support
`- BDwIIabIeIength
`enhancements
`segmentationand
`transfonn
`- Halfpbielmotion
`- ImprovedDC
`oodlngofDCt
`- Enurreslllence
`transformationoptions
`- Sailarquantlsatlon
`- Sllceslrlxniredcodlng
`quantlsatlon preclslon
`coefficlents
`- Segmentmdlngof
`. lntra—llnter—plcture
`- Zlg-zagsan
`- DConly'D’pictures
`- Scalablllty(SNR,
`- Median motionvector
`shapes
`predlcflonandentropy
`- Rlin length
`- Quantisationwelghting
`spatial,breallpolnt)
`prediction
`- o—treewaveletcoding
`andtransfonncoding
`- Variablelengflicodlng
`nlatrlces
`- I-plcturemrxzealment
`- Optional,enhanced
`ofslilltextiires
`changes
`motionvectors
`moda
`- Moreandudlng
`- Moretlndudlng
`optional features)
`optional features)
`Sol-mumlmmmummmmmrwminmummcmnwummm 'Dmhmlulsinfidmcwligmmmmis
`
`TABLE 3. AVC and HEVC licence rates and estimates
`
`Standard
`
`Licenslng group
`Numberofwwmenls
`
`
`
`HEVC Advance
`Velos estimate
`Total estlmate
`
`3.704
`4.417
`3,321
`3,200
`
`
`
`
`
`Handset royalty ($)-hlghestrate
`$0.65
`$020
`$0.75
`ism
`$020
`SperLom paternsfor handset
`$0.05
`$005
`$020
`$023
`
`
`Handset cap
`510 million
`525 million
`$30 million
`Unknown
`555 II.» plis
`$20 mllllon
`$6.5mliiion
`$75 million —
`Samplelolaimyailylorio million llilts $1.5 million
`
`Sal-1:2: IPEGMmHMmmmadmmmmmmfNMBdmkam-lgm El'ltlspmmsarecurentty'll botfl MPEGLAandmmmm
`unzmmhrmmflmaaeditmmmfwmemau
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`bu May/Junezou
`www.lAM-media.com
`
`Analysingthe leading HEVC patent pools | Feature a
`
`Video compression basics
`
`Audio and video compression use mathematical techniques to achieve signltimnt savings
`in file sizes. This quick summary focuses on the video component. Uncompressed video ls
`made up of multiple still frames — these frames are the starting point for compression.
`- Each still frame can be broken Into smaller blocks. The visual Imagery In those blodrs
`can be estimated or compressed using complex mathematical equations. This is Iossy
`compression — the reconstituted still Image will not be Identical to the source still Image.
`. The blocks themselves can also be compared forsimllarities and redundancies
`eliminated, thus providing further compression. For example, a blue sky In the
`background will have a lot of redundancy.
`- Next Is handling motion — Ifyou start looking at the differences between two successive
`frames ofa moving picture, there Is often llttie change from frame to frame. Thus, Ifthe
`movement ofthe handful of blocks with changes can be estimated, it Is not necessary to
`retransmit the whole compressed frame but ratherjustthe heavily changed blocks and
`the movement of blocks.
`
`This Is a quick, not-too—mathy summary ofthe fundamentals ofvideo encoding. The
`downside Is that It might leave you scratching your head: why or how do newer compression
`standards do betterthan older ones? The answer is In the details Briefly: HEVC offers more
`flexibility or uses difierent mathematical compression approaches than AVC at each step to
`enhance the amount of redundancy that can be Identified and compressed out.
`
`Figures 2 and 3 together translate the dilemma for
`consumer electronics manufacturers operating in the
`environment of Moore's Law into economic terms:
`
`deliver laptops, mobile phones and tablets with twice
`the computing power for lower prices year after year
`after year. While ya: do not show the graphs for this, the
`storage capacity ofcomputers and network bandwidth
`across the network has been following a similar curve.
`It is worth contrasting this with expectations for
`higher—resolution video owr that same period (eg, from
`1080p in 2003 to, say, 8K presently). The 1080p video
`would be 1,920 x 1,080 pixels, while the 8K video is
`
`FIGURE 2. Computer prices 2002-2015
`
`AVC launch 2003: SUI!) computer
`
`1
`
`
`
`HEVC laundl 2013: $271
`(a significantly
`better computer)
`
`1
`
`7,680 x 4,320 pixels. 50 that is a factor of 16 times more
`pixels per videofi'ame; in tact it is slightly higher due to
`increased bit depths.
`Against this backdrop, what does the patent and
`licensing landscape for HEVC look like?
`
`HEVC licensing demands
`The known public demands (and estimates) for licence
`fees for AVC and HEVC are summarised in Table 3. We
`know that some of the public data is inaccurate or out of
`date (see “Moving target analysis" buxout). Nonetheless,
`for this analysis we will use the public data as is (data
`retrieval dates are noted), even though that may skew the
`estimates slightly. Rdatedly, while Vdos’s data is not
`publicly available, we have estimated its holdings and
`royalties,asdiscussed firrflrerbelovuAlso,giventhe
`relative newness of HEVC as a standard, there are still
`pending patent applications around the world that are
`not yet reflected in the pools lists.
`We analyse the rates through several different lenses
`in Table 3 to provide contact on how the different rates,
`caps and patent holdings interact with the pricing. Thus,
`compared to a peak price of $0.20 per handset for the
`sole AVC pool, a consumer electronics manufacturer
`
`FIGURE 3. Computer performance 2002-2015
`
`
`
`10mm improvement in processors
`atHEVC Iaundl 2013: 13),!!!) MIPS
`l
`
`
`
`AVC Iaundl
`m 10 MIPS
`
`
`
`l
`
`$§§§°$§10%?$§§§§§
`musmmmrm'lmg-tumpflceuendshrconwters,
`Mmdrelatediterns'mreEcmonisnaiy,0ctoheruzms)
`
`§$§$$$$$$§§§§$
`
`mamuimwmmmmmmmomm
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`Feature | Analysing the leading HEVC patent pools
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`May/June 2018
`www.IAM-media.com
`
`Table 4 provides a framework for measuring the scale
`of risk from companies outside the three pools. The court
`ruled against the contribution approach in TCL
`Communications v Ericsson (SACV 14-341 JVS and CV
`15-2370 JVS; December 2017 finding of facts by a
`magistrate judge in the District Court for the Central
`District of California). We are using contributions here
`primarily as a way of assessing the potential size of
`portfolios of unaffiliated companies. This table
`synthesises an analysis that the Velos pool is sharing
`(upon request) about the adopted contributions by the
`HEVC technical committee. In brief, Velos manually
`reviewed the meeting minutes of the HEVC technical
`committee (over 20 meetings) to analyse the disposition
`of the thousands of proposed technical contributions for
`inclusion in HEVC. They counted only those
`contributions that were adopted and not later removed.
`A single contribution from multiple parties was counted
`as a contribution for all of the parties (eg, if companies
`X, Y and Z contributed proposal #1234, then each of the
`three companies would be counted as having made one
`contribution). Contributions are a useful way of thinking
`about sources of intellectual property in the standard.
`Contributions are not a guarantee that the contributor is
`the sole inventor of intellectual property in the
`contribution but intuitively it should correlate.
`We received similar data (but for contributions to the
`main profile only) from HEVC Advance. The two pools’
`contribution counts, while different, were directionally
`quite similar. HEVC Advance’s data reflected more
`reassignments from patent transactions showing the
`purchase of patents from unaffiliated entities primarily
`by the Dolby entities and GE. Surprisingly, unaffiliated
`companies represent a large percentage of contributions,
`with 37% of all adopted contributions when both
`main and extensions are considered. Looking briefly
`at the pools, when both main and extensions are
`considered, Velos has the highest percentage of adopted
`contributions by far (39%). In contrast, for main-only, the
`gap was narrower, with the Velos and HEVC Advance
`pools being nearly equal after account was taken of
`reassignments of patents from unaffiliated contributors.
`Returning to the purpose of contribution analysis:
`estimating unaffiliated patents. This can be done by using
`the average number of patents listed (or estimated) per
`pool to compute a ratio of patents per contribution. The
`average contribution ratio (20.6 per contribution) across
`the three pools can be multiplied by the number of
`unaffiliated but adopted contributions (305) to arrive at
`an estimated number of unaffiliated patents of 6,295.
`This would dwarf any single pool taken alone in size.
`For reference, companies with five or more
`contributions that are unaffiliated with the pools are
`
`Three pools
`
`Unaffiliated
`
`530
`
`63%
`
`10,938
`
`20.6
`
`305
`
`37%
`
`6,295
`
`N/A
`
`planning to make a handset that supports HEVC
`would be facing an estimated $1.60 per handset charge.
`As explained below, that becomes an estimated $2.25
`handset charge once unaffiliated companies are included.
`Table 3 uses the maximum rate for handsets. For
`example, HEVC Advance has a rate structure with
`tiered regional rates and lower prices if only the main
`profile for HEVC is implemented (as opposed to also
`implementing all of the optional extensions). Depending
`on your specific handset configurations and shipping
`locations, you might see lower rates than this table
`suggests. If your company made and sold 100% of its
`handsets in China and included none of the extensions,
`the HEVC Advance rate would be $0.20 per handset
`before discounts. As this brief discussion suggests, it
`is key to accurately modelling your company’s handset
`volumes and necessary features.
`The third pool from Velos includes several companies
`with significant patent holdings: Ericsson, Sharp, Sony,
`Panasonic and Qualcomm. Notably, Velos is more than
`just a pool since it directly owns, licenses and can directly
`litigate at least some of the patents (though one of the
`MPEG LA pool holders appears to be an MPEG LA
`subsidiary with former Panasonic patents). The USPTO
`patent assignment database shows assignments of over
`100 patent assets into Velos Media LLC from members.
`We used the midpoint of $0.20 (MPEG LA price) up
`to $1.30 (twice the HEVC Advance price) to model
`Velos’s rate in Table 3 at $0.75. We modelled the total
`Velos controlled/administered patents as follows: starting
`with the assignments listed in the USPTO database,
`we performed an International Patent Documentation
`patent family expansion to identify approximately 800
`patents and publications assigned to Velos. We then
`assumed that the participants retained relevant assets
`as well, which we would estimate as between three and
`five times the amount transferred to Velos. Thus, we
`modelled the pool multiplying by four in Table 3 and
`estimated 3,200 total patent assets. We acknowledge that
`this creates a bit of an apples-to-oranges comparison
`between the Velos pool and the other two pools.
`However, it is a useful starting point for analysis.
`As with AVC, some companies will opt to sit outside
`of the pools for HEVC. Many have been concerned that
`Technicolor, a large historical participant in video codec
`patent pools, has opted to sit outside the three pools
`at this time. This specific example may be somewhat
`mitigated by the fact that Dolby (in HEVC Advance)
`has bought a number of patents from Technicolor. As this
`article went to press, Technicolour announced a deal with
`InterDigital, a known patent licensor, to own and manage
`the Technicolor patents (see this issue’s Insight piece on
`InterDigital’s acquisition of Technicolor’s licensing arm).
`Either way, there will be additional licensing demands
`from companies outside the pools. By way of example
`from AVC, Motorola was a notable patent owner which
`opted to license directly. The litigation stemming from
`Motorola’s licensing programme includes a case brought
`by Microsoft asking Motorola to set a rate for AVC
`(Microsoft Corp v Motorola Inc, 2:10-cv-01823-JLR). In
`that case, the court used principles of proportionality to
`set a licence rate for Microsoft that was less than 1% of
`Motorola’s original ask (2.25% of ASP or $4.5 on a $200
`ASP smartphone; the award was $0.00555 per handset
`or a 0.002% royalty on a $200 ASP smartphone).
`IPR2020-01048 - UP0001401
`HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY
`
`TABLE 4. HEVC adopted contributions
`
`Pool
`
`Number of adopted contributions
`
`Percentage of total adopted contributions
`
`Patent count
`
`Patents per contribution
`
`Sources: Velos-provided analysis of HEVC meeting minutes decisions available at http://phenix-int-evry.fr/jct/ combined with
`ROL Group allocation of companies to pools according to January 2018 data. Totals are for the main profile and all extensions
`
`United Patent, LLC. Ex. 1048 Page 6 of 12
`United Patents, LLC v. Elects. & Telecomm. Res. Inst., et al.
`IPR2021-00368
`
`

`

`kn IIIyIJune zou
`www.IAM-medla.com
`
`Analysingthe leading HEVC patent pools | Feature II.
`
`listed in Table 5. These 14 companies represent over 80%
`ofthe unaffiliated but adopted contributions. As with our
`discussion ofTable 6 (below), these are companies where
`a cross——licence maybe particularly helpfulor reducing
`patent aposure without signing up for a patent pool.
`'lhatintumgivesustheinsighttoestimatethelikely
`patent demands fiom the unaffiliated contributors.
`Given the quantity ofcontributions and estimated
`holdings among a group ofsophisticated patent
`licensors, we estimate that the unafliliatcd parties,
`in aggregate, will seek an amount comparable to
`
`TABLE 6. Licensors with at least 50 listed assets by pool
`
`TABLE 5. Unaffiliated
`companieswlthiive
`ormore adopted
`
`
`contributions Samsung
`
`NiT Docorno
`
`Sansung
`Dolby (Int’l & Labs) Sharp
`
`”0050“
`Interdigltal
`
`T'
`USTC
`LG
`MW
`C300"
`Broadcom
`
`3'3de
`Toshiba
`MovieLabs
`
`Huawei
`Harmonic
`
`General Electric
`Mitsubishi
`
`ETRI
`HFI (MediaTek)
`Philips
`
`Sony
`Panasonic
`
`Qualcomm
`Velos
`
`M&KHoldings
`JVC Kenwood
`
`SKTeleoom
`lnfobrldge Pie
`M&KCorp
`NEC Corp
`Taglvan II (MPEGLA)
`ETRl
`
`intellectual Discovery
`Fujitsu
`SumflPEGMdeEVCMwemitesasofJamymuam pubicdm
`mvuospaudpmmmsambymmotmmiamuvm.
`mshmm.mmm“mmmwccum Hrvc
`Mnnmpodsufiizors,amumauyuiiiiaynehi£vcmm
`
`Movingtarget analysis
`
`This analysis Is not static. the number of assets In HEVC Mimnce tripled In the live months
`from the start of our analysis to the publication deadline. This afiects all ofthe financial
`models. To be clear, this Is a challenge forthe pools. Keepingthe data current poses a
`frustrating operational challenge to any patent owner. It also is critical to etiectively getting
`your message out.
`Consider the top—line diiferences from our original data pull at the start of September
`2011 compared to the current data (notably Samsung's and E‘iRl‘s patents are still part of
`MPEG [A at least until 2019).
`.........,.,..,.,....—w—
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`somewhat less dramatic
`Currentdata pull (January 2018) 4,417
`Prospective adopters could
`Chang
`+2545
`create more detailed models
`using the lists In conjunction with the number of patent families, number ofcontributions
`and Mmates of growth rates to better anticipate the likely changes overtime.
`More generally, the lnfonnatlon needs to be easily accessible by potential adopters. None
`of the pools currently provide the data In public, easily accessible fomrs (eg, formatted
`spreadsheetsonllneversus PDFs thatare notaseasytoworkwith).Wlthouteasyaccessto
`basic patent porltolio lnfonnatlon, the pools risk alienating their prospective licensees.
`the obvious problem for anyone looking to negotiate or renegotiate a license with a pool is
`howtotradrwhatthestateofiheworldwas,whatltisandwhatltlsllkelytobecome.Ittums
`out that this can be aiflcaL We are undertaking to tradr this lnfonnatlon so that models can
`be made that, for example, project future portfolio holdings when a renewal comes due.
`
`3,321
`+2302
`
`|PR2020-01048 - UP0001402
`
`HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY
`
`the HEVC Advance rate (30.65 per device). Using
`these assumptions, we estimate that the total bill for
`HEVC would be $2.25 per handset. 011 a $200 ASP
`smartphone, this would he a 1.1% royalty.
`Before we discuss how to navigate the landscape, an
`exploration of the pools patent holdings is useful.
`
`HEVC patent landscape
`Unlike private patent negotiations, historically the video
`patent pools have made the patents licensed readily
`available to the public. In the case ofHEVC, both
`MPEG LA and HEVC Advance have websites that list
`
`the patents available for license. A third pool, Velos, does
`not currently publicly list its patents for license.
`The availability of public lists provides an easily
`accessible avenue for a number of different analyses.
`Three main areas are particularly valuable:
`0 patent priority year distribution, to compute remaining
`life;
`0 geographic distribution ofpatent coverage, to check
`alignment between patent coverage versus your
`practise of the patents; and
`0 distribution ofownership, to assess the value ofdirect
`licensing instead ofpooled licensing.
`
`Each ofthese will help with risk and cost asseesments
`and will be considered in turn.
`Before diving into the analysis, one other point is
`mrth mentioning. Technically, the HEVC standard,
`like prior video compression standards, only specifies the
`format and mechanism for decoding video. This means
`that companies encoding video into HEVC format (or
`transcoding existing video into HEVC format) may
`do so in anyofa numberofways provided that the
`result is a compatible decodable HEVC stream. For
`this reason, this discussion oflicensing focuses on the
`decoding or user device side. While streaming services
`still face demands for licences for their encoding and
`transmission, we will not be co