Is H.264 a legal minefield for video pros?

If you're a digital-video professional--the sort of person who records weddings, sells stock footage, or edits B-roll--chances are good you deal with the H.264 video encoding technology. But after reading software license agreements, you might well wonder if you have rights to do so.

A recent blog post by Harvard Ph.D. student Ben Schwartz, including the provocative phrase "Final Cut Pro Hobbyist," put the spotlight on license terms in Apple's video-editing software by questioning when professionals may use H.264 video. A similar "personal and non-commercial activity" license requirement appears in Adobe Systems' competing Premiere package, too.

Schwartz's contention caught my attention: my SLR shoots 1080p video encoded with H.264, and I'm in a position both to publish some videos online for my main job and sell others on the side. And with bubbling controversies regarding how HTML is reshaping online video, any troubles with H.264 constraints take on new interest.

It seemed like a good time to call Apple, Adobe, and the MPEG-LA, the industry group that licenses the H.264 patent portfolio to the likes of software companies, optical-disc duplicators, Blu-ray player makers, and others who have need to use H.264.

I was a little alarmed when Apple and Adobe declined to comment--it's their software people are buying, after all. I got a similar response from Microsoft, which includes similarly restrictive H.264 language in its Windows 7 license.

When I heard back from Allen Harkness, MPEG LA's director of global licensing, though, I was relieved to learn that Final Cut Pro isn't just for making YouTube cat videos.

But H.264 use isn't all free all the time--the wedding videographer might need to pay 2 cents per disc they sell, for example--and even experts can be thrown off by the complications.

"I agree that the language in these licenses is a bit off-putting, on first read. I had a similar reaction the first time I read the license," said Dan Homiller, a patent attorney with intellectual property firm Coats and Bennett. "The biggest problem with the particular language that MPEG LA requires their licensees to use is that it sounds threatening to ordinary users of the end device."

Although I'm somewhat reassured in this particular matter, the broader issue raises my hackles.

End-user license agreements, privacy policies, and terms and conditions are impenetrable enough as it is. I fear that in the technology era, ugly legal realities will intrude in new ways into ordinary peoples' lives, whether it's worrying about licensing the music your toddler is dancing to on YouTube, having your electronic books withdrawn, or being charged with illegal surveillance when recording video with a mobile phone.

But back to the specific H.264 case. Let's start with the background.

H.264 license terms
H.264 is what's called a codec, technology to encode and decode media such as video or audio. In the video domain, its rivals include VC-1 from Microsoft, Ogg Theora from the Xiph.org Foundation, and VP8 from On2 Technologies, a company Google acquired in February for $124.6 million.

MPEG LA's simplified diagram of H.264 licensee types.

(Credit: MPEG LA)

For historical reasons involving marketing, standards groups, and industry jargon, H.264 goes by many names. It's also called AVC (short for Advanced Video Coding), MPEG-4 Part 10 (the acronym refers to the Moving Picture Experts Group), and JVT (Joint Video Team). When it comes to licensing, it gets even more complicated.

MPEG LA licenses a portfolio of more than 1,000 H.264-related patents on behalf of 26 companies that hold the patents.

Among the companies whose patents are covered by the portfolio (the full H.264 patent list is available in PDF form) are: Frauenhofer, Microsoft, LG Electronics, Panasonic, Philips Electronics, Samsung, Sharp, Sony, and Toshiba. MPEG LA licenses the patents on behalf of this group.

So how exactly does this translate into the world of video editing? Here's the language from the Apple Final Cut Pro license agreement (PDF):

To the extent that the Apple Software contains AVC encoding and/or decoding functionality, commercial use of H.264/AVC requires additional licensing and the following provision applies: THE AVC FUNCTIONALITY IN THIS PRODUCT IS LICENSED HEREIN ONLY FOR THE PERSONAL AND NON-COMMERCIAL USE OF A CONSUMER TO (i) ENCODE VIDEO IN COMPLIANCE WITH THE AVC STANDARD ("AVC VIDEO") AND/OR (ii) DECODE AVC VIDEO THAT WAS ENCODED BY A CONSUMER ENGAGED IN A PERSONAL AND NON-COMMERCIAL ACTIVITY AND/OR AVC VIDEO THAT WAS OBTAINED FROM A VIDEO PROVIDER LICENSED TO PROVIDE AVC VIDEO.

Here's how Adobe puts it for Premiere:

16.17. AVC DISTRIBUTION. The following notice applies to software containing AVC import and export functionality: THIS PRODUCT IS LICENSED UNDER THE AVC PATENT PORTFOLIO LICENSE FOR THE PERSONAL AND NON-COMMERCIAL USE OF A CONSUMER TO (a) ENCODE VIDEO IN COMPLIANCE WITH THE AVC STANDARD ("AVC VIDEO") AND/OR (b) DECODE AVC VIDEO THAT WAS ENCODED BY A CONSUMER ENGAGED IN A PERSONAL AND NON-COMMERCIAL ACTIVITY AND/OR AVC VIDEO THAT WAS OBTAINED FROM A VIDEO PROVIDER LICENSED TO PROVIDE AVC VIDEO. NO LICENSE IS GRANTED OR SHALL BE IMPLIED FOR ANY OTHER USE. ADDITIONAL INFORMATION MAY BE OBTAINED FROM MPEG LA L.L.C. SEE http://www.mpegla.com.

So what about professionals?
"Personal and non-commercial activity" sounds ominous for professionals.

But it turns out it's not, exactly.

The H.264 licensing language is broad to head off various efforts to dodge licensing requirements, Harkness said. "As soon as you try to be specific about a commercial purpose, everybody tries to find a way around it."

The "Final Cut Hobbyist" moniker isn't right, Harkness said.

"There are some areas where you can use a product, and that type of use isn't going to be covered under the license. It's not that they're trying to withhold coverage. There isn't a license associated with that use," Harkness said. "In some cases people can use a product in a commercial way and not be able to receive coverage under our license."

For somebody supplying footage to a movie studio, for example, H.264 licensing requirements don't enter into the calculation until the last step in the production chain--broadcast of the movie or replication of its disc, Harkness said. An H.264 license would be needed, though, for a band making and selling its own concert video disc, he said.

"Whoever is the seller of AVC video to the end user is the party who needs to take a license," he said.

But the wedding videographer might need to take an AVC/H.264 license--though payments will hardly be a big burden even if they're sending out 100 DVDs of somebody's nuptuals.

"Per Section 3.1.2 of the AVC License (Title-by-Title AVC Video), the royalty for each title greater than 12 minutes in length is 2.0 percent of the remuneration paid to the Licensee or $0.02 per title, whichever is lower. In other words, the royalty would not exceed $0.02 per disc for the videographer," said MPEG LA spokesman Tom O'Reilly.

But practical matters also factor into the likelihood of actual enforcement--for example in the situation in which a Windows 7 user watches H.264 video.

"Realistically, it's unlikely that a consumer who unwittingly plays a video clip from an unlicensed source is going to be pursued by MPEG-LA or by patent owners. The legal framework for patent damages is different than it is in the copyright area, so you're not likely to see lawsuits against ordinary consumers, like some of the highly publicized suits filed by the RIAA [Recording Industry of America] in the United States," Homiller said.

Another way where professionals can get off the hook for payments is if the video is broadcast for free over the Internet. Earlier this year, MPEG LA extended through 2015 a provision that means streaming H.264 video over the Net requires no royalty payments as long as anyone can see the video without paying.

Ultimately, for the license terms one sees in software, MPEG LA errs on the side of sounding tough.

"The purpose of the provision in the MPEG LA license is to ensure that the license doesn't cover commercial distribution of H.264-encoded video," Homiller said. "It would be nice if there were a 'gentler' way to convey this, but it might be challenging to do so without opening up some loopholes that the licensers would regret."

[rhoyerboat]

This is a an excellent article, and so to the point one can almost miss the way a collection of patent-holders, who may I add, should have no claim to the 2000-5000 years of scientific progress that led up to the creation of H.264, hypothetically have so much leverage!

It goes against common sense for the public at large to utilize a proprietary codec when a free codec is available.

[Hamranhansenhansen]

That's just it: a free codec is not available. If you distribute video in Ogg nobody can view it. There's no Ogg in all the video players. There is a hardware H.264 player in *everything*. It's a discless DVD player.

Where you're charged for H.264 is when you charge someone else. People are willing to pay *much* more for a video they can play (H.264) than for one they cannot (Ogg, VC-1, other nonstandard codecs). So you make *more* money with H.264 because the 2 cents per user is trivial compared to not being able to distribute the video at all.

If you're not charging for the video, H.264 is just as free as the other codecs, except again, users can see it. So free distribution of video to any non-paying user is a bonus of H.264 along with cheap distribution to any paying user.

[msliczniak]

"Another way where professionals can get off the hook for payments is if the video is broadcast for free over the Internet. Earlier this year, MPEG LA extended through 2015 a provision that means streaming H.264 video over the Net requires no royalty payments as long as anyone can see the video without paying."

I see a problem there. Often these videos come from web pages that have ads. In that case I no longer see these videos as free anymore. I would think that MPEG-LA now deserves a royalty. Okay so the site serving the video is on the hook, but the scary language makes it seem that I as the viewer am on the hook as well since I am not covered by clause (ii) or (b). Why am I not? Since the website that served the video did not pay for a license. (Or did they, how would I know?)

[Hamranhansenhansen]

The viewer is not on the hook for anything, that is quite clear in this article. These are patents, not copyrights. You cannot possibly violate the patent license by viewing the video. The license fee is for people who *sell* video. It's not for camera users, video editors, or end users. It's the domain of accountants.

If you sell video, H.264 is worth paying for because it pays for itself. It enables any user to buy your video and play it, which means you sell more video. In other words, you sell 10,000 H.264 instead of 5 Ogg. You male much more money with H.264. You cannot lose money with H.264.

If you don't sell video, H.264 is entirely free. Apple filibustered MPEG-LA for 6 months in 2001 so that free video stayed free. H.264 is not just a free codec, it's a complete video ecosystem of players, recorders, editors. There is nothing else that is comparable. Running a nonstandard software codec on one PC is not comparable.

[msliczniak]

This reply is to Hamranhansenhansen. I went and checked. I cannot get an online copy of the agreement, but I can read a summary. In there under (b) (2) "remuneration is from other sources" under "Internet broadcast" my fears are put to rest. In fact there is a license granted to any web site that serving ad supported AVC until 2015. So the site is off the hook. Since there was a license, then I as the viewer am off the hook due to the clauses (ii) or (b) that will be found in software that decodes AVC. Of course I cannot read any of the actual licenses but trusting that summary and the above excepts and believing that they will all be very similar I think I have nothing to worry about until 2015. Your response though interesting did not really do anything to answer the questions I raised. It was not clear until I was able to convince myself that ad supported AVC over the web counted as "free" in this article. To me it did not, in fact the summary of the license makes the distinction based on if the end user pays directly or the remuneration is form other sources. I feared that there was no license granted in the case of ad supported web broadcast AVC.

[bjskelly]

I haven't researched this question, but here is my fear.

Although the cost per disk is low, the minimum payment may be high.

I looked into getting a license to stream music. I could afford the per track charges, but the minimum amount for a license was $700. All I wanted to do was to stream some music to a few friends once a week.

Like I said I don't know what the rules for H.264, these are just my fears.

[Hamranhansenhansen]

If you're not charging your friends, the payment is zero. If you're charging, then they're your customers and you have to pay a cut for the codec.

[bigbang]

Thanks so much for an excellent article. I am a book publisher wrestling with an issue you didn't cover, but one that I suspect will become very common:

People will be expecting way more from traditional books once they are on an interactive device like the iPad--case in point, "The Elements" iPad app, which was also released in traditional book form before it became an iPad app. Many traditional book publishers are creating iPad apps that are hybrids between a traditional book or ebook and an app, and these apps will have brief videos embedded in the traditional book text.

For instance, our hybrid ebook-app will include brief explanatory videos we have already done that are free to watch on YouTube. But if we also make them a part of our iPad app, how do I handle the H.264 licensing situation? People will be paying for the iPad app, but the video content is also free on YouTube. Or what if we include within the app easy links to the free video on YouTube? People are still paying for the app, but the video can be viewed for free.

Thanks very much for your thoughts.

Paul