The joint license includes patents that are essential to the HEVC standard, also known as H.265 and MPEG-H Part 2, and are designed to improve video coding and transmission efficiency for the benefit of Internet, television, and mobile service providers and consumers with increased speed and capacity. HEVC is also expected to deliver next generation higher resolution HDTV video by broadcast, streaming, download, and 4K Blu-ray for 4K and 8K Ultra High Definition TV.

“The market is ready for an HEVC License,” said MPEG LA President and CEO Larry Horn, “and MPEG LA is proud to offer one. We applaud the cooperation and hard work of HEVC patent owners to make this important technology available through an efficient licensing alternative.”

Among the terms agreed to by the 23 patent holders:

Decoder‐Encoder Sublicenses

HEVC Products Sold to End Users by a Licensee with (a) ownership/control of the brand name or (b) if the HEVC Product bears no brand name, with discretion over decision to Sell 

• 0 ‐ 100,000 units/year = no royalty (available to one Legal Entity in an affiliated group)
• US $0.20 per unit after first 100,000 units each year
• Maximum annual royalty payable by an Enterprise (Legal Entity and Affiliates) is $25 million for present coverage during the first License Term
• Includes right to make, use and sell
• Royalties are payable for HEVC Products from May 1, 2013 forward

Additional terms:

• No separate Royalties for HEVC content
• Vendors of semiconductor chips or other products that contain an HEVC encoder and/or decoder may pay royalties on behalf of their customer who is a Licensee subject to that Licensee’s annual cap.

Basically, vendors who sell HEVC decoders that will soon be found on numerous consumer display devices will not pay the royalty until they hit 100,000 units (that’s Apple and Android territory).

“We’re glad that this milestone has been achieved to add clarity for the overall HEVC ecosystem,” said Keith Wymbs, chief marketing officer for Elemental Technologies, stating that the number of units it has sold with HEVC inside are below the 100,000 unit limit, so they are adversely not impacted by the terms.”

Elemental offers its software-based products—such as Elemental Live—with HEVC in order to conserve bandwidth for HD and 4K resolution images.

The 23 Patent Holders currently include:

• Apple Inc.
• Electronics and Telecommunications
• Fujitsu Limited
• Hitachi Maxell, Ltd.
• HUMAX Holdings Co., Ltd.
• Intellectual Discovery Co., LTD.
• JVC KENWOOD Corporation
• Korea Advanced Institute of Science and Technology (KAIST)
• Korean Broadcasting System (KBS)
• KT Corp
• NEWRACOM, Inc.
• M&K Holdings Inc.
• NEC Corporation
• Nippon Telegraph and Telephone Corporation (NTT)
• NTT DOCOMO, INC.
• Orange SA
• Research Institute (ETRI)
• Samsung Electronics Co., Ltd.
• Siemens Corp.
• SK Telecom
• Tagivan II, LLC
• The Trustees of Columbia University in the City of New York
• Vidyo, Inc.

Thierry Fautier, Vice President, Solutions Marketing, at Harmonic, another vender that provides encoding technology that uses HEVC, said that while the fees are necessary for the industry to move forward with implementing the technology sooner than later, it’s “difficult to judge,” whether the fee structure is fair because, like Elemental, Harmonic does not have to pay royalties under 100,000 units. “Although it seems the $25M cap is high.”

Fautier said that he’s surprised that Technicolor, Microsoft, Sony, Qualcomm, and Mediatek, which own related patents, have decided not to participate in the pool. However he added that the terms “are good, and close to the licensing terms for MPEG-2.”

“There obviously are differences between historic MPEG2/H.264 and HEVC licensing terms,” said Elemental’s Wymbs. “For example, H.264 and MPEG2 terms were notably more complicated than those for HEVC as we understand them. MPEG2 and H.264 terms imposed fees for delivered content, creating media, etc., whereas HEVC fees appear to only be based on encode and decode.”

The latest license terms run until December 31, 2020, when they will be eligible for renewable for successive 5-year periods after the life of any Portfolio patent.

“The HEVC License is yet another example of the role the MPEG LALicensing Model plays in making licenses available on reasonable terms under standard-essential patents (SEPs) for emerging technologies,” added Bill Geary, Vice President of Business Development at MPEG LA.